HomeCrypto/ForexWHAT ARE SHORT SALES IN THE CRYPTO MARKET?

WHAT ARE SHORT SALES IN THE CRYPTO MARKET?

In 2018, after generating a considerable increase in regulations on cryptocurrencies, a decrease in digital currency trading operations was caused, triggering the supply and, therefore, the sale of these financial instruments, which represented a crisis for many and an opportunity for others. More information on The Bitcoin System trading platform system

Bitcoin short selling

It is an investment option applied by traders where the crypto active is sold with the expectation that its price may decrease in a short period, managing to benefit from this difference in market value.

After selling, the trader hopes to buy again at a much lower price to continue cyclically with the operation.

This strategy is usually bought with the common phrase of financial jargon, “buy low and sell high” this is usually primarily by investors who have the perspective that the market will continue with a downward trend.

It is then where investors find their greatest motivation to execute short sales operations; perhaps during these months, these traders are the ones that have obtained the most significant benefit, maybe not in large capitalizations, but in successful operations since the trend bearish has been permanent since the beginning of the year.

It is usually the tool used by Bitcoin skeptics who consider that more than an investment project that strengthens over time and whose market capitalization has reached high values, it is just a fad regarding markets.

Although the macroeconomic scenario is not optimal, we are facing a progressive increase in the number of followers of cryptocurrencies and their future uses; consequently, the blockchain represents one of the technologies with the most significant long-term potential.

The viable option for many investors to reduce risks is through short operations since the volatility and changes that can be generated in the long term are unknown.

The objective is to obtain profitability by recovering the possible losses brought by a downward trend concerning the initial acquisition price.

Risk management is a relevant aspect

Short sales have become very popular, which has undoubtedly harmed the price of Bitcoin since many investors have preferred to take this investment position to recover some portion of what was sold and lost during the crypto winter.

This strategy responds to the prevailing need of investors to reduce their risk of loss in the first place. It is there where the evaluation of the environment is considered necessary because risk management in this type of investment becomes unlimited.

When a Bitcoin is acquired, the most significant loss is the value for which said digital currency has been accepted; unlike short sales, the risk is subject to the fact that the loss goes against market movements.

The delimitation of a reasonable stop loss contributes to the fact that if the market goes against the investor’s perspective, his loss may be less.

Short sales in just four steps

To carry out financial investment operations with Bitcoin or cryptocurrencies, it is necessary to consider a set of aspects that previously did not affect the market but that today are infallible to determine the movements of the crypto market.

In the case of carrying out short sale operations, the following steps must be considered:

  1. Get to know the Bitcoin Project (or the selected cryptocurrency)

Short sales require global knowledge of the project in which it is invested and the various actions that can modify the market and make it vulnerable to turning complex stages into opportunities.

  1. Establish the appropriate way to sell

Two ways are usually the most used. These are the traditional sales executed through the broker where the asset is sold, and only the benefit of the price difference is obtained.

The second option is sales with derivatives, where the broker is not loaned but only speculates based on the price; from there, a profit percentage has obtained the Exchange itself establishes that.

  1. Make your first short sale trade
  2. Start monitoring market movements

Conclusion

There are various investment strategies in the crypto market, which is why traders constantly search for higher returns and manage to establish different standards to obtain higher profits.

Shoumili Sarkar
Shoumili Sarkar
21. Upcoming Lawyer. Writing is my passion, and I feel nobody should derail away from their passions!

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Must Read

spot_img