Investing Trading Cryptocurrency & Bitcoin How To Short Sell Bitcoin By Brian Edmondson Brian Edmondson Brian Edmondson is a banking and online business specialist with two decades of experience working in the financial industry as an employee and an entrepreneur. Brian is the founder of the Bankruptcy Recovery Foundation, a regular contributor to Entrepreneur, and was a financial analyst and advisor at Merrill Lynch. learn about our editorial policies Updated on May 15, 2022 Reviewed by Chip Stapleton Reviewed by Chip Stapleton Chip Stapleton is a Series 7 and Series 66 license holder, passed the CFA Level 1 exam, and is a CFA Level 2 candidate. He, and holds a life, accident, and health insurance license in Indiana. He has eights years' experience in finance, from financial planning and wealth management to corporate finance and FP&A. learn about our financial review board Fact checked by David Rubin Fact checked by David Rubin Facebook Instagram Twitter David J. Rubin is a fact checker for The Balance with more than 30 years in editing and publishing. The majority of his experience lies within the legal and financial spaces. At legal publisher Matthew Bender & Co./LexisNexis, he was a manager of R&D, programmer analyst, and senior copy editor. learn about our editorial policies Share Tweet Pin Email In This Article View All In This Article Betting Against Bitcoin Are the Glory Days of Bitcoin Over? Is Bitcoin the Next 'Big Short'? Options for Short Selling Get Started Short Selling Bitcoin Photo: Getty Images/GeorgeManga The cryptocurrency Bitcoin made a relatively unheralded entrance in the financial world when it was introduced in 2009. But its profile has risen steadily over the years as more and more people are becoming interested in this alternative form of currency. Along with the increased interest in Bitcoin experienced rapidly increasing but volatile value. After spending much of the first half of 2017 hovering around $1,000, it hit $5,000 in October, breached $7,000 in early November and $19,000 briefly in December, before plummeting back to under $7,000 in March 2018. Bitcoin's most meteoric rise to date then occurred from mid-September 2020, when it was priced at under $11,000, to early April 2021, when it broke $60,000. It fell back to under $32,000 by July 2021, rebounded to break $65,000 in November, and fell back to around $36,000 in January 2022. As of mid-May 2022, one Bitcoin was worth about $30,000. (By the way, you should know that you don’t have to own whole Bitcoins to invest in this cryptocurrency. You can buy “fractions” or “percentages” of a Bitcoin.) More and more financial institutions are accepting Bitcoin. Many see Bitcoin as a safe haven in a worldwide economy that is volatile, as Bitcoin is not controlled by any government. As of May 2022, studies of Bitcoin's safe-haven status are inconclusive. Key Takeaways Bitcoin has caught the notice of the mainstream financial press and the world’s biggest investors and major players in the investment world.You can “short” Bitcoin. You can actually profit when any investment, including Bitcoin, drops in value.This means you can benefit from even relatively small declines in value, as well as the more extreme fluctuations in Bitcoin's value.As with any investment, learning how to short sell Bitcoin is not a walk in the park. It takes research and some willingness to take the risk. Betting Against Bitcoin Despite the hype, the financial world is chomping at the bit to bet against Bitcoin. Bitcoin futures are traded at CME Group Inc. (Chicago Mercantile Exchange) and TD Ameritrade. Once those futures contracts were available, hedge funds and other big investors were ready to pounce. Why? Many financial watchers say Bitcoin is the best shorting opportunity ever. Part of the reasoning is that after reaching $11,000 in value, the cryptocurrency dropped almost 20% in value in under six hours, to just over $9,000. Then it reached over $11,000 again a few days. There is an opportunity in that volatility. Are the Glory Days of Bitcoin Over? Bitcoin has caught the notice of the mainstream financial press and the world’s biggest investors and major players in the investment world, not to mention everyday traders who have come to understand that trading in Bitcoin can be very lucrative. One way to get in on the action is to buy Bitcoin and then hold on to it, waiting for it to increase in value. When it reaches a price you feel comfortable with, you can then sell it and then pocket the profit. This was a more viable option many years ago, in the early days. Many Bitcoin millionaires were born in the early days. Take Erik Finman, who started investing in Bitcoin when it was just $12. Or take Barry Silbert, who bought 48,000 Bitcoins for $350 each in 2014 when the U.S. Marshals Service auctioned off the stash of Ross Ulbricht, the creator of the Dark Web site Silk Road, the New York Times reported. To give you some perspective, if you had invested $1 in Bitcoin near the very beginning, at $0.06 in August 2010, it would be worth $500 million today. If you feel like you missed the boat with Bitcoin you can always invest in these other cryptocurrency alternatives to Bitcoin. Is Bitcoin the Next 'Big Short'? That brings us to what many believe is going to be the next way to cash in big on the Bitcoin phenomenon: You can “short” the cryptocurrency. What goes up must come down, and you can actually profit when any investment, including Bitcoin, drops in value. If you’re not familiar, shorting an investment is a relatively simple process—as far as the actual trading. It’s figuring out your investment play—and actually making a profit as the value of the investment goes up or down—that’s the tricky part. As with any investment, you can’t just jump into the action uninformed and uneducated. But the great news is that you don’t have to be a pro. Anybody can learn how to short sell Bitcoin to potentially profit. With the price of Bitcoin continuing to be relatively volatile and many analysts claiming that its meteoric rises are unsustainable, the urgency to start trading and learning how to short sell Bitcoin has never been more imperative. Another factor to consider is that world governments are closely scrutinizing Bitcoin exchanges and investments in the cryptocurrency. Due to its anonymous nature, authorities are concerned about the tax avoidance possibilities. Options for Short Selling Want to short sell Bitcoin? You have a few options: Direct Short Selling of Bitcoin This is the simplest type of short selling Bitcoin: You sell off your existing Bitcoin at a price you are comfortable with. Your hope is that the value drops further; and then, if you so choose, you can buy Bitcoin again at a lower price. Margin Trading of Bitcoin Many people start short selling Bitcoin by using a margin trading platform dedicated to cryptocurrencies. With this type of trading, you borrow money from a broker, make the trade, hoping that your bet pays off. There are several Bitcoin exchanges that allow margin trading at this point, so you have plenty of options. Futures Trading of Bitcoin You can also find ways to short sell Bitcoin in the futures market. Here’s how it works: a future is basically a contract. You, as the buyer, agree to buy Bitcoin at a future date at a certain fixed price. In this type of trading, you’re predicting—hoping—that the price of Bitcoin will go up. That way, when your contract expires you can buy Bitcoin below the market price. Options Trading of Bitcoin Another way you can figure out how to short sell Bitcoin is with options trading, which involves “put” and “call” options. With a put option contract, you have the right to sell a specified amount of Bitcoin, which you set, at a certain price at a certain time. This is called the strike price. The put option gains value as Bitcoin loses value compared to this strike price. Importantly, you are not obligated to sell the option if you don’t want to. A call option contract gives you the right to buy shares in the same way. With this contract, you have the option to buy a certain amount of Bitcoin at a specific price until a certain date—that’s the expiration date. Get Started Short Selling Bitcoin We’re still in the early days of shorting Bitcoin. For years, in-the-know investors have been coming up with creative ways to profit by shorting Bitcoin. But with futures contacts coming from big-name institutions CME Group Inc., Cboe Global Markets, and Nasdaq Inc., it’s set to get even easier to short the cryptocurrency. That means you can make money by betting on its decline, which many bearish market watchers say is inevitable. With the volatility, you don’t have to wait for a full-on bubble burst to profit. You can benefit from even relatively small declines in value, as well as the more extreme fluctuations in Bitcoin's value. As with any investment, learning how to short sell Bitcoin is not a walk in the park. It takes research and some willingness to take the risk. Most financial advisors would equate it with gambling ... but if you play your cards right, you can benefit financially. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Yahoo Finance. "Bitcoin USD." Khreshna Syuhada, Djoko Suprijanto, Arief Hakim. "Comparing Gold’s and Bitcoin’s Safe-Haven Roles Against Energy Commodities During the Covid-19 Outbreak: A Vine Copula Approach," Finance Research Letters. Darko Vukovic et al. "COVID-19 Pandemic: Is the Crypto Market a Safe Haven? The Impact of the First Wave," Sustainability. CoinDesk. "Bitcoin." Nasdaq. "Erik Finman Youngest Crypto Millionaire on Bitcoin Deficiencies." New York Times. "At an Auction of Bitcoins Seized From Silk Road, SecondMarket Wins Big." Buy Bitcoin Worldwide. "Bitcoin Price Today & History Chart." U.S. Securities and Exchange Commission. "Funds Trading in Bitcoin Futures – Investor Bulletin."