Short Selling

Short selling is a trading strategy where an investor bets that the price of a cryptocurrency or asset will go down, aiming to profit from its decline.

How Short Selling Works

In crypto, short selling typically involves borrowing a digital asset and selling it at the current price. If the asset’s price drops, the trader buys it back at the lower rate, returns the borrowed amount, and pockets the difference. This can be done through margin trading on exchanges that offer leverage, or using derivatives like futures and options.

Why Short Selling Matters

Short selling adds liquidity and balance to the market by allowing traders to profit in bear markets or hedge their positions. However, it carries high risk, especially in crypto, where prices are volatile. Losses can be unlimited if the asset price rises instead of falls, so it’s a strategy often reserved for experienced traders.