How to Sell Short Ethereum (ETH) When the Market Is Down
Over the years, the crypto sector has grown steadily thanks to Ethereum and other amazing DeFi projects that want to shake up the industry and Bitcoin. Many traders and investors want to deposit their money in Ethereum and other assets, but they haven't thought of how to "short"...
Over the years, the crypto sector has grown steadily thanks to Ethereum and other amazing DeFi projects that want to shake up the industry and Bitcoin. Many traders and investors want to deposit their money in Ethereum and other assets, but they haven’t thought of how to “short” Ethereum to make money.
What is Ethereum Shorting ?
Ethereum short (ETH short) or short selling ETH is a strategy and method that many traders and investors use to make money in the cryptocurrency market. This is especially true in a continual downtrend or a bear market, when assets like Ethereum have more downtrends than uptrends.
Traders, investors, and institutions bet on an asset’s rise and fall using technical analysis and other methods such as chart patterns, candlestick patterns, price movements, technical indicators, and fundamental news that affects the market and prices of assets.
Short-selling Ethereum is a speculative approach to trade Ethereum. After anticipating the price of ETH, a trader or investor creates a short position to make money from the price differences of ETH. When the price falls, the trader or investor makes money. This means that a trader or investor opens a short position for ETH and buys it back later at a cheaper price using alternative methods, such as a futures contract with the help of an Exchange like Margex.
Shorting Ethereum or ETH, or any other asset that can be traded, is based on a simple idea: a trader must sell an asset and then purchase it back at a lower price or a price that is lower than the original price. This makes the trader money.
Traders and investors can take part in this type of speculative trading on a number of exchanges and platforms for a small fee. One of these exchanges is Margex, which lets traders trade with up to 100X leverage size, either long or short position, as a derivative exchange. This lets traders profit from a market that is going down.
Traders can short Ethereum in a number of ways, such as using technical analysis, chart patterns, margin trading, futures trading, options, and leverage tokens, depending on how much risk they are willing to take and how much they know about trading. These methods can help traders stay ahead of the market and make more money.
Pros of Selling Ethereum
To short ETH, a trader needs to know how to use technical analysis to predict what the market will do next and open a short position. We’ll go over some of the various benefits of shorting ETH below.
Traders use the hedge to make up for substantial losses in their portfolios caused by a decline. This means that a trader would open a short position to sell ETH. If the trader’s guess is true, the price difference will make the trader money.
Throughout history, leverage or margin trading has been used more than other types of trading. This is because it gives traders the chance to make big profits with small amounts of capital and a large amount of leverage. Based on their experience, traders make a lot of money when the price of an asset goes in their favor.
Cons of Selling Ethereum Short (ETH)
Since the price of Ethereum can’t go to zero, there is a limit to how much you can make by shorting ETH. There is also a strong chance that the transaction will go against your initial short position, leaving you susceptible to losses with no limit. When you short ETH, your losses are hypothetical and might go on forever. Because of this, it would be smart to have a stop loss in place.
How to Sell Ethereum Short (ETH)
There are a few ways to short Ethereum, but we’ll only look at one of the most common techniques to short an asset.
Ethereum Futures Trading
A futures contract is an agreement between two parties that one of them will buy or sell ETH or any other asset at a certain moment throughout the contract. Most of the time, the contract is concluded based on its conditions.
A trader who wants to short ETH will open a sell futures contract and agree to sell ETH to the buyer at a lower price. As the price of BTC decreases, the trader will make money from the price difference.
Traders can open a futures contract for either a long or a short position on Margex. This lets them profit from changes in the market. Assets on Margex are safe from pump-and-dump schemes, so you don’t have to worry about losing coins. This will make trading on Margex better for you.
How should you best short Ethereum?
There is no ideal order or technique to short ETH. Most traders prefer to employ futures contracts, which let them use leverage to get a bigger return on their investment utilizing trading platforms like Margex.
Should I borrow money to sell ETH short?
When traders use leverage to short ETH, they can make more money with the same amount of margin or funds. Still, it’s up to the trader to decide if they want to employ leverage depending on their trading expertise and personal preferences.
What Happens if You Short a Cryptocurrency and it Goes to Zero?
A cryptocurrency could only go to zero if it was taken off of every exchange where it could be traded. In short, a cryptocurrency’s price can’t go to zero, but its trading volume can. If the price of a cryptocurrency drops to zero, it means that someone has taken it without giving anything in exchange. Margex MP shield and price manipulation protection were developed to safeguard traders from these kinds of situations and from being exposed to price manipulation.