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I like it when Bitcoin drops! How do I earn money in the downtrend?

Bitcoin price is dropping again. Although the price of bitcoin had rebounded to $59,000 as soon as it touched $56,600, the downside pressure continued to drive down the price. Perhaps we are still in a bull market as those analysts keep saying, but any sensible person will agree that at the moment we are surely facing some strong downward pressure. 

This price plunges no doubt make investors feel very stressed, but price volatility is all too common in the crypto market. According to Mark Dow, a former IMF economist who made handsome money shorting bitcoin, the annualized volatility of bitcoin exceeds 100%. In other words, the daily price fluctuation of bitcoin is greater than 6%. 

This could be bad news for spot traders and hodlers, who only get to make money when the price of bitcoin goes up. But for me, volatility is what helps me earn money. And my tool is shorting bitcoin futures. 

What is bitcoin shorting?

Like every other financial asset, bitcoin allows traders to short it. This usually means borrowing bitcoin from a broker and selling it at its current price. When the price of bitcoin drops, you buy back the same amount of bitcoin and pay back the broker, and you get to keep the money made out of the price differences. 

In futures trading, the procedure is so much simpler. you deposit bitcoin in an exchange and open a short contract when the price of bitcoin slides. If what you are trading with are perpetual contracts,  you can keep them open as long as you like, provided that you have enough margin. 

Futures trading, when used with leverage, could be very profitable. Leverage means that the exchange you are using lends you certain money to enhance your position. 

Let’s illustrate with an example:

  • You open a short contract with 1 BTC when one bitcoin is worth $60,000.
  • You close the contract when bitcoin’s price drops to $55,000. Then you will earn 0.09 BTC.
  • If you use 100x leverage, which means borrowing 99 BTC from the exchange, you are going to earn 0.09*100 = 9 BTC 

When should you go short?

We often say it is impossible to time the market, but there are several ways to help us analyse the market. To become a good trader, you should learn to do technical analysis and fundamental analysis. 

Technical analysis

Learn to read charts and familiarize yourself with different indicators and patterns. Take support as an example. But once the price drops below the support level, it is very likely that it will plummet to the next support level. If that happens, it could be a good time to short bitcoin. If you are new to technical analysis, you could take a look at the Bexplus blog where I learn the basics of different indicators and price analysis.

Where to short bitcoin?

Finding an exchange you can trust is crucial. Available tokens, fee structure, mobile apps, customer services are some of the most important factors to think about. Bexplus is my top choice in future exchange. It offers 100x leverage in BTC, ETH, DOGE, ADA, and XRP futures contracts. No KYC is needed and it is available to traders from the U.S. if you are a beginner, the demo account is really useful for you to improve your skills trading in a real environment without worrying about losing money. 

Advantages of Bexplus

  • No KYC, no information leakage
  • Demo account with 10 BTC
  • 100% bonus for every deposit 
  • Interest wallet with up to 21% annualized interest 
  • Trade on the go with Bexplus App
  • Affiliate program with up to 50% commission reward
  • 24/7 customer support

Join Bexplus to Get a 100% Deposit Bonus!

PhonesWiki
Aryan Pathania
A Student who simply loves gadgets and gizmos. I like to go through tech updates and yeah, they call me a nerd for that.

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