Investing.com - So far this year, Bitcoin has gone in one direction and in one direction only – up. The cryptocurrency who started the year at under 1000 dollars is now very close to reaching a new high of 10000 dollars. While the rise of bitcoin has made many people happy and wealthy, some believe that bitcoin is an overpriced asset ready to crash. If you are interested in shorting bitcoin, here are your options.
First, Contracts for difference. This financial instrument, called CFDs, is mirroring the movement of a certain asset, in our case bitcoin. Dealing CFDs does not involve the direct purchasing or selling of bitcoin, but is an agreement between trader and broker to settle a rise or drop in a certain asset.
Another option to short bitcoin is through Exchange Traded Notes, or ETNs. One of the notes is called Bitcoin Investment Trust, and belongs to Grayscale. The problem is that notes do not perfectly reflect the movement of bitcoin, and hence are less accurate than CFDs or regular short selling.
The third option is through an exchange like Bitfinex, who allows margin trading. The exchange allows a trader to borrow cryptocurrencies to short. Bitfinex requires an initial equity ratio of 30%, in order to open a leveraged position.
Short selling and using leverage are advanced trading methods, and caution is advised – but if bitcoin is indeed a bubble, shorting it will allow for nice gains if the bubble pops.