Shorting Crypto | Tutorial & Brokers

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William Berg
William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.
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Jemma Grist
Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.
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Tobias Robinson
Tobias is a partner at DayTrading.com, director of a UK limited company and active trader. He has over 25 years of experience in the financial industry and contributed via CySec to the regulatory response to digital options and CFD trading in Europe. Toby’s expertise and dedication to financial education make him a trusted voice in the industry, including a BBC investigation into digital options.
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Shorting, or short selling, is a form of trading where an investor seeks to make a profit when the value of an asset, such as Bitcoin, falls. Shorting crypto is an exciting, although risky strategy capable of generating profits. This guide will explain how to short cryptocurrency on leading exchanges including Binance, Coinbase and Kraken.

Crypto Shorting Brokers

Binance is one of the best-known crypto exchanges. The company is available in more than 180 countries with over 120 million registered customers. The platform offers a suite of crypto trading products, from staking and NFTs to derivatives.
Coinbase is a leading cryptocurrency exchange that provides access to 18,000+ crypto assets that can be traded on the marketplace, stored in a wallet or borrowed via the brand's DeFi function. The US-based firm has over 10 million clients and offers educational support to individual traders and tailor-made derivative products for businesses.
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Kraken is a leading cryptocurrency exchange with a proprietary trading terminal and a list of 220+ tradeable crypto tokens. Up to 1:5 leverage is available with stable rollover fees on spot crypto trading and up to 1:50 on futures. The exchange also supports crypto staking and has an interactive NFT marketplace.
eToro is a top-rated multi-asset platform which offers trading services in thousands of CFDs, stocks and cryptoassets. Launched in 2007, the brand has millions of active traders globally and is authorized by tier one regulators, including the FCA and CySEC. The brand is particularly popular for its comprehensive social trading platform. Crypto Trading is offered via eToro USA LLC; Investments are subject to market risk, including the possible loss of principal. CFDs are not available in the US Cryptoasset investing is highly volatile and unregulated in the UK and some EU countries. No consumer protection. Tax on profits may apply. 76% of retail accounts lose money.
76% of retail investor accounts lose money when trading with this provider. eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
Robinhood is a stock broker and financial services firm based in California. The broker offers commission-free stocks, cryptos and ETFs, plus other products such as cash cards and retirement accounts. Despite its robust regulation, Robinhood has been involved in numerous scandals and security breaches since 2020. We urge investors to exercise caution.
Webull is a multi-regulated trading app that offers stocks, options, forex, cryptos, ETFs, fractional shares and more. The firm is authorized by the SEC, FINRA and FCA and continues to uphold a strong trust rating. Low fees, no minimum investment and generous welcome bonuses have made the discount broker popular with online investors.
Established in 2012, Hong Kong-based Bitfinex is a formidable player in the crypto industry. It boasts a powerful proprietary platform, 180 cryptocurrencies and more than 430 market pairs available for spot or perpetual swaps derivatives trading. With new payment methods, lower entry barriers and fresh products like crypto futures, Bitfinex is attracting a wider range of active crypto traders.
Interactive Brokers (IBKR) is a premier brokerage, providing access to 150 markets in 33 countries, along with a suite of comprehensive investment services. With over 40 years of experience, this Nasdaq-listed firm adheres to stringent regulations by the SEC, FCA, CIRO, and SFC, amongst others, and is one of the most trusted brokers for trading around the globe.

What Is Crypto Shorting?

To open a short position, a trader borrows a cryptocurrency and sells it on an exchange at the current price. The trader then buys the digital currency at a later date and repays the capital borrowed. If the price of the coin has dropped, the trader will make a profit on the difference between the cost of buying and selling.

Let’s look at an example:

  1. You want to short one Bitcoin when the market value of Bitcoin is £40,000. Therefore, you borrow one Bitcoin and sell it at market value, earning £40,000
  2. The price of one Bitcoin drops to £30,000
  3. You buy one Bitcoin for £30,000 and return it to the broker you borrowed it from plus any interest
  4. You keep the difference between the sale and purchase price, meaning £40,000 – £30,000 = £10,000 (minus any interest)

Shorting crypto is the opposite of going long – a trader should short when they expect a currency to decrease in value, and go long when they expect the coin to increase in value.

Shorting or longing is different from pump and dump schemes, where a group of investors artificially raise the price of a currency and sell it when it’s high.

How to short cryptocurrency

The easiest way to short cryptocurrencies is through a margin trading platform. Margin trading allows an investor to borrow capital from a broker which could either increase your gains or losses. Some margin trading platforms also allow you to short cryptocurrencies with futures contracts, where you agree to sell or buy an asset for a set price, on a fixed date.

Although the potential for gains shorting a volatile market like crypto is real, the level of risk is much higher. In a typical long position, the currency can only ever drop to zero – in which case you lose your original investment. In a short position, the price of Bitcoin for example has the potential to rise infinitely – and so do your losses.

Pros Of Shorting Crypto

Short selling is an advanced strategy that should only be undertaken by experienced investors. However, get it right and there are multiple benefits:

Cons Of Shorting Crypto

Downsides of shorting cryptocurrencies include:

How To Start Shorting Cryptos

If you’re interested in shorting cryptos, follow our step-by-step guide:

  1. Find a trend – The cryptocurrency market is extremely volatile and can be influenced by any number of factors. Developments in news, politics or even celebrity culture can all influence the value of popular cryptocurrencies. Make sure you carry out careful analysis of the asset you want to start shorting, be it Bitcoin, Ethereum, Ripple or another.
  2. Open a margin trading account – Most of the top crypto brokers offer short selling capabilities with leverage, including Binance, Coinbase, eToro and Kraken. However, regardless of whether you’re from Canada, India, Europe or elsewhere, it’s important to adhere to regulations in your country. For example, investors in the UK can no longer trade derivatives on cryptocurrencies.
  3. Minimise your risk – The digital currency market is turbulent and losses on short positions can grow exponentially. Make use of stop losses and take profit levels in your trading platform to limit your exposure. Many brokers also offer useful crypto shorting calculators.
  4. Open your position – Once you have determined your entry and exit points, go short and sell the cryptocurrency that you’re interested in.

Shorting Crypto On Binance

If you want to short Bitcoin or other cryptocurrencies on Binance, you have a couple of options:

  1. Margin trading – Once you have opened a live account, head to the dashboard, select ‘Margin’ and complete the necessary identification checks. Next, load your account with funds, then navigate to the margin trading platform and open a position on the crypto that you’re interested in.
  2. Futures & options – You can also short cryptocurrencies using futures and options contracts, including perpetual and quarterly futures. Download the broker’s mobile app for iOS or Android to start short selling on your phone. Ensure you have enough funds in your wallet before you start trading.
Binance crypto shorting
Binance app

Shorting Crypto On Coinbase

Coinbase is a US-headquartered company and one of the most popular crypto exchanges worldwide. Margin trading is no longer available on Coinbase but you can start short selling without leverage using futures contracts. So once you have signed up for an account, identify a downward trend on one of the dozens of coins available and then take your position.

Shorting crypto on Coinbse
Coinbase app

Shorting Crypto On Kraken

Kraken is one of the biggest Bitcoin exchanges in the US. Margin trading is available so once you have completed the KYC checks, take advantage of the range of leverage options.

To open a short position:

And for the exit:

Kraken crypto shorting
Kraken app

Final Word On Shorting Cryptos

Shorting crypto like Bitcoin can be an effective trading strategy. Implemented correctly, experienced traders can take advantage of the volatile digital currency market. And with increasing government regulations and a host of new tokens emerging all the time, prices are constantly rising and falling.

With that said, beginners should avoid shorting strategies due to the increased risks. See our guide to trading cryptocurrencies for more ideas, including day trading and ETFs.

FAQ

What Does Shorting In Crypto Mean?

Shorting crypto means borrowing an amount of digital currency from a broker and selling it at market value. Once the value of the crypto has fallen, the trader then buys it and returns the borrowed amount, plus any interest, to the broker. The profit is the difference between the cost of buying and selling the crypto.

Is Shorting Bitcoin A Good Idea?

The crypto market is highly volatile and the profit potential in short positions can be appealing. However, short selling is also risky and traders can lose more than their original deposit. As a result, short selling is best suited to experienced investors.

Is Shorting Bitcoin Halal?

Shorting cryptocurrencies like Bitcoin Cash is usually considered Haram because it involves the selling of something that is borrowed. However, it may be worth consulting your religious leader for guidance.

Where Can I Short Crypto?

There are several crypto platforms on which margin, futures and options contracts can be traded. Some of the best include Binance, Robinhood, Coinbase, Kraken, eToroWebull, Bitfinex, Interactive Brokers, Cryptohopper and Kucoin.

Is Shorting Crypto Illegal?

In traditional financial institutions short selling is highly regulated. However, crypto trading is unregulated in many jurisdictions, including the US, Canada, Australia, Europe and India. Traders should be wary of cryptos being hyped on social media as this could be a deceptive pump and dump scheme. Note, trading crypto with CFDs or other derivatives is no longer possible in the UK.