Shorting Bitcoin is a Bad Bet Because Bitcoin Is Going Nowhere But Up.
If you’re an investor wringing your hands in glee at the chance at shorting bitcoin to make money be prepared to pay up. Bitcoin is on the fast track in transforming world currency and investing markets. If ever there were a Bitcoin bubble that ship has sailed. When China put the screws to most Bitcoin activity on the mainland the price plummeted. Then came back up and hit brand new highs a few days later.
If you’re new to futures trading I strongly suggest you do your research. A lot of it. Shorting Bitcoin will have you reaching for your checkbook to pay the CME or CBOE when your contract comes up and the price puts you on the wrong side of the deal. How wrong? Upside down wrong. Underwater.
In other words you are very probably going to lose money.
Crypto Capers’ founder Howard Sherman covered Bitcoin futures but he only scratched the surface.
To understand why take this crash course on the futures markets and then we’ll continue.
Since Bitcoin pricing has steadily increased in value year over year from simply an investment standpoint coupled with the fact that more and more businesses are accepting bitcoin as a form of payment, we’re seeing mass-market adoption and validation of bitcoin as a viable currency in its own right. This is more-or-less what Bitcoin values have looked like over the years. As a result, your Bitcoin futures contract to short bitcoin is going to cost you money since you know you have to cover the difference at cash settlement of the price plus the margins. Business Insider broke down the risk of shorting bitcoin perfectly. The transaction fees alone should scare away most would-be bitcoin investors.
Shorting Bitcoin and going against the market is very likely going to be a money-losing proposition. If you want to make money on Bitcoin futures you should consider a futures contract where Bitcoin is at a higher place using history as your guide. Or just buy bitcoin outright. Do your research, do the math then make a well-informed decision based on conclusions.