Economy
Financial Experts Have Explained How to Short Crypto on the Market in 2023
Can You Short Cryptocurrencies? – Contrary to popular belief, shorting cryptocurrencies is possible. While short selling is traditionally associated with the stock market, cryptocurrency exchanges now facilitate shorting options. Traders can take advantage of this opportunity by focusing on cryptocurrencies with high liquidity and consistent trading volumes to minimize the risk of price manipulation. Cryptocurrency markets are known for their volatility, making it challenging to predict price movements. However, by employing short-selling techniques, investors can profit from falling prices without owning the underlying assets. In this article, TU experts explore how to short crypto, including the risks involved and the best strategies to implement.
In simple terms, what does it mean to short cryptocurrency?
Shorting cryptocurrency involves borrowing digital currency from a broker and selling it at the current market price. After the cryptocurrency’s value decreases, the trader buys it back and repays the borrowed funds plus interest to the broker. The profit is the margin between the purchase and sale prices of the crypto.
Shorting Cryptocurrency: Different Ways to Do It
There are various options for shorting crypto. Among them, analysts at Traders Union particularly emphasize the following ones:
- Margin Trading: Borrowing funds to enter short positions on cryptocurrency exchanges.
- Short-Selling Bitcoin Assets: Selling Bitcoin with the expectation of buying it back at a lower price.
- Using Bitcoin CFDs: Trading contracts for difference (CFDs) based on the price fluctuations of Bitcoin.
- Futures Market: Engaging in futures contracts that allow investors to short cryptocurrencies.
- Binary Options Trading: Speculating on whether the price of a cryptocurrency will increase or decrease within a predetermined time period.
- Prediction Markets: Participating in platforms that enable users to bet on the outcome of future events.
To discover the main pros and cons of the above options, read the article prepared by TU.
Step-by-Step Guide on How to Short Crypto
Traders Union experts suggest following their Step-by-Step Guide on shorting crypto. Here is a summarized version of the guide:
- Select a reliable cryptocurrency exchange and proceed to register for an account.
- Deposit funds using various methods, including debit/credit cards, bank transfers, or cryptocurrencies.
- Conduct a thorough market analysis to inform your short-selling decisions.
- Select the specific cryptocurrency you wish to short from the derivatives section of the exchange.
- Execute the short position, specifying the desired amount and adhering to risk management principles.
- Maintain a disciplined approach by following your risk management plan throughout the short-selling process.
Risks and Opportunities of Shorting Cryptocurrency
Shorting cryptocurrencies presents both advantages and risks. On the positive side, it allows investors to profit from overvalued assets and hedge against potential market downturns. However, TU analysts note that price volatility and the lack of regulation in the cryptocurrency futures market pose significant risks. Analysts particularly underscore the importance of conducting comprehensive market research and carefully consider these risks before engaging in short-selling activities.
Cryptocurrency Short-Selling Strategies
To maximize the effectiveness of short-selling, experts suggest traders employ the following strategies:
- Technical and Fundamental Analysis: Combine historical price data and trading volume analysis (technical) with an evaluation of a cryptocurrency’s long-term potential (fundamental).
- Diversification: Short a variety of cryptocurrencies to diversify your holdings and mitigate the impact of potential losses.
- Short-Term Shorting: Take short positions for brief periods, known as scalping, to capitalize on quick profits. This strategy requires a high tolerance for risk and a solid understanding of market conditions.
- Caution for Beginners: Shorting cryptocurrencies carries significant risk, making it unsuitable for inexperienced traders. Consider adopting a more conservative approach, such as buying and holding, when starting out.
Conclusion
Short-selling cryptocurrencies can be a lucrative strategy for experienced traders, but it comes with inherent risks. Using borrowed funds amplifies these risks, so Traders Union analysts recommend implementing proper risk management practices, including the use of stop losses. Beginners are advised to exercise caution and gain a thorough understanding of market dynamics before attempting short-selling strategies.
By Adedapo Adesanya
The market capitalisation of the NASD Over-the-Counter (OTC) Securities Exchange rose by 1.70 per cent or N32.36 billion on Thursday, April 10, closing at N1.925 trillion, in contrast to the N1.892 trillion quoted at the preceding session.
However, the NASD Unlisted Security Index (NSI) went up by 10.46 points or 0.32 per cent to 3,287.85 points from the 3,277.39 points it ended a day earlier.
The market capitalisation was higher yesterday after admitting additional shares of Infrastructure Credit Guarantee Company Plc (InfraCredit) to the platform after regulatory approval. The firm joined the NASD Exchange on March 6.
The company, backed by the Nigerian sovereign wealth fund, added 11.166 million units to bring its volume to 26.421 million.
At the trading session, FrieslandCampina Wamco Nigeria Plc gained N1.91 to close at N38.50 per unit versus N36.59 per unit, Mixta Real Estate Plc rose by 41 Kobo to N4.55 per share from the previous closing value of N4.14 per share, Lagos Building Infrastructure Company (LBIC) Plc grew by 17 Kobo to N2.63 per unit from N2.80 per unit, and Paintcom Investment Plc improved by 2 Kobo to N10.74 per share from N10.72 per share, while Geo-Fluids Plc declined by 22 Kobo to N2.00 per unit from N2.22 per unit.
The volume of transactions surged by 9,665.9 per cent to 18.1 million units from 185,449 units, the value of transactions soared by 7,174.3 per cent to N192.9 million from N192.9 million, and the number of deals rose by 81.8 per cent to 20 deals from 11 deals.
Impresit Bakolori Plc ended the day as the most active stock by volume (year-to-date) for trading 533.9 million units worth N520.9 million, trailed by Industrial and General Insurance (IGI) Plc with 71.2 million units valued at N24.2 million, and Geo Fluids Plc with 44.6 million units sold for N90.2 million.
FrieslandCampina Wamco Nigeria Plc also remained as the most active stock by value (year-to-date) with 14.5 million units valued at N559.2 million, followed by Impresit Bakolori Plc with 533.9 million units worth N520.9 million, and Afriland Properties Plc with 17.8 million units sold for N365.0 million.
By Adedapo Adesanya
The Naira witnessed a depreciation of 1.05 per cent or N16.97 against the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Thursday, April 10, exchanging at N1,629.94/$1 compared with the previous day’s rate of N1,612.99/$1.
In the same official market, the Nigerian currency, however, traded flat against the Pound Sterling and the Euro during the session at N2,085.01/£1 and N1,805.64/€1, respectively.
As for the black market, the domestic currency depreciated against the greenback yesterday by N5 to sell for N1,620/$1, in contrast to the N1,615/$1 it was exchanged at midweek.
The Naira had stabilise on Wednesday in the spot market after President Donald Trump of the United States announced a 90-day pause on tariffs for more than 75 nations, including Nigeria, that did not retaliate to his sweeping duties announced a week ago.
However, China, which recently placed steeped retaliatory tariffs on US goods, did not get any relief, as Mr Trump hiked the total levy on Chinese goods to 125 per cent.
Market analysts raise worries about a secondary effect of a trade war between the US and China, and how it can have effected on other nations’ economies.
Even as the Central Bank of Nigeria (CBN) continued to prop up the local currency, in the last week, the Naira has exchanged between the N1,570 and N1,620 mark.
Meanwhile, the cryptocurrency market was mixed on Thursday after exchange-traded funds (ETFs) saw outflows even as prices surged after President Trump announced a 90-day pause in tariffs on most countries, excluding China.
The dwindling demand can be attributed to the macroeconomic uncertainty caused by the US-China trade tensions that has led to macro investors selling every asset, including crypto ETFs, for cash.
Litecoin (LTC) gained 1.9 per cent to trade at $75.88, Cardano (ADA) jumped by 1.4 per cent to $0.6321, Dogecoin (DOGE) appreciated by 0.3 per cent to $0.1575, and Solana (SOL) rose by 0.2 per cent to $116.94.
On the flip side, Ethereum (ETH) dropped 3.6 per cent to settle at $1,533.42, Bitcoin (BTC) shed 1.2 per cent to end at $81,017.23, Ripple (XRP) slumped by 0.2 per cent to $1.99, and Binance Coin (BNB) went south by 0.1 per cent to $579.45, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited was rescued from the claws of the bears on Thursday by 0.58 per cent in an operation led by Caverton and other price gainers.
This was triggered by renewed bargain-hunting in the financial services sector during the trading session, with the insurance counter expanding by 2.69 per cent.
Further, the banking index grew by 2.65 per cent, the consumer goods sector appreciated by 0.59 per cent, and the energy counter rose by 0.08 per cent, while the industrial goods industry depreciated by 0.03 per cent, with the commodity index closing flat.
At the close of business, the All-Share Index (ASI) went up by 601.24 points to 104,788.25 points from 104,187.00 points and the market capitalisation increased by N378 billion to N65.848 trillion from N65.470 trillion.
Investor sentiment was strong on Thursday as there were 45 price gainers and 11 price losers, representing a positive market breadth index.
Caverton flew higher by 10.00 per cent to N2.31, Neimeth leapt by 9.92 per cent to N2.88, Japaul gained 9.52 per cent to close at N1.84, Union Dicon soared by 9.45 per cent to N6.95, and Mutual Benefits improved by 9.30 per cent to 94 Kobo.
On the flip side, ABC Transport crashed by 10.00 per cent to N1.26, Eterna slipped by 9.90 per cent to N32.30, CAP depreciated by 7.45 per cent to N43.50, Regency Alliance crumbled by 3.64 per cent to 53 Kobo, and NGX Group lost 3.23 per cent to trade at N34.50.
A total of 432.6 million shares valued at N9.7 billion exchanged hands in 12,027 deals at Customs Street yesterday, in contrast to the 376.6 million shares worth N11.9 billion transacted in 11,576 deals at midweek, indicating a shortfall in the value of trades by 18.49 per cent, and a rise in the volume of transactions and number of deals by 14.87 per cent and 3.90 per cent, respectively.
The most active equity was Access Holdings after it traded 77.9 million units for N1.6 billion, Ellah Lakes exchanged 44.2 million units worth N132.8 million, Fidelity Bank sold 32.5 million units valued at N614.8 million, Zenith Bank transacted 30.2 million units worth N1.5 billion, and UBA traded 20.5 million units valued at N719.0 million.
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