How to short Bitcoin

Can You Short Crypto and Bitcoin on Binance? Get Signup Bonus!

Yes, you can short any crypto on Binance!

  • Short Bitcoin on Binance via spot margin trading, futures, perpetual trading, leveraged tokens trading, or options trading. All possibilities offer leveraged trading opportunities.
  • Shorting means you borrow assets to sell and repurchase them later to return. Hopefully, you will repurchase them at a lower price.
  • Read how to short on Binance, step-by-step
  • It’s more about short interest, a short squeeze, and more.

Binance Referral Code: -20% on all commissions with our link

What is Shorting Bitcoin?

In theory, shorting Bitcoin means that you borrow Bitcoin from someone else to sell in the market.

Why should I short Bitcoin?

Because you believe you can repurchase them later at a lower price and hand the Bitcoin back to the lender.

When should I short Bitcoin?

When you believe in a bear market, you speculate on a decreasing Bitcoin price and want to profit from it. Shorting is the perfect opportunity for you.

As always, there must be a counter currency when you trade currencies. Usually, the counter currency is USD, but it can theoretically be any currency like ETH or EUR (if the market exists). 

Best exchange to short Bitcoin

Binance is the best exchange to short Bitcoin. However, if your jurisdiction cannot do KYC on Binance, you should check how to go short on Bybit.

If you are from the USA or Canada, you can check the best crypto futures trading sites for the USA.

Short-Selling Bitcoin Calculation

Let’s calculate a short-selling Bitcoin, take an example.

1. Bob wants to short Bitcoin on Binance when the price is $10.000 BTC

2. Alice does lend Bob 1 Bitcoin, and Bob sells that Bitcoin to the market for USD 10.000.

3. Now, Bob can face two different scenarios.

a. Either the price goes up for Bitcoin

b. Or the price goes down for Bitcoin

4. Luckily, the price decreased to $9.000, and Bob buys back the Bitcoin and gives it back to Alice. Bob did make a profit of $1000 in this trade.

If Bitcoin had increased in price to $11000, Bob would have lost $1000 if he would close the trade at this price. However, if the Bitcoin had continued to increase, he would finally be forced to liquidate his position. This is what we refer to as a short squeeze.

Read more about short selling an asset on Investopedia.

Can I Earn Good Profits from Shorting Bitcoin?

Yes, of course. Otherwise, the trading opportunity wouldn’t exist. However, the crypto trading risks differ between longing and shorting an asset, especially Bitcoin, since it’s considered a volatile asset.

First, you must understand that you lose money when an asset increases in price. Since there is no limit on how much an asset can increase in price, risks are generally higher for shorting than for longing since an investment can’t decrease more in price than having a zero value. 

Also, before shorting Bitcoin, or any other asset, you must understand that markets are(or can be) irrational. It means a price can increase to the skies with no underlying reason other than mega speculation or hype. 

➤ Remember that the “markets can stay irrational much longer than you can stay solvent,” so always think twice before you short an asset.

Read more about shorting risks at the bottom of this article.

How to Short Bitcoin on Binance?

Now we get to the juicy part – we will show you how to short Bitcoin on Binance and earn profits. Here are the steps you need to take to make it happen:

Step 1: Create an account on Binance. Easy enough and takes about 10 minutes total to do. Provide your email and password and put on two-factor authentication (2FA).

Step 2: Analyze the different shorting options on Binance. Binance offers several additional opportunities to short Bitcoin and other crypto assets. Those include

  1. Binance Spot Margin Trading
  2. Binance Futures and Perpetuals Trading
  3. Binance Leveraged Tokens
  4. Binance Options

1. Shorting on the Binance Spot Margin Trading Market

Binance margin trading allows you to choose between 3 options; 

  • Cross Margin
  • Isolated Margin

The entire margin balance is shared across open positions in cross-margin mode to avoid liquidation. If the cross-margin is enabled, the trader risks losing their total margin balance and any open positions in the event of a liquidation.

In contrast, to cross margin, the isolated margin is the margin balance allocated to an individual position. The isolated margin mode allows traders to manage their risk in their respective positions by restricting the amount of margin given to each.

How to short on the Binance Spot market with margin trading?

  1. Signup and create an account
  2. Deposit Funds
  3. Open Margin Account (Click “Trade” and “Margin”)
  4. Transfer Collateral Funds into a “Cross Margin” or “Isolated Margin” account.
  5. See the screenshot below: First, Select Cross margin or Isolated margin.
  6. Select Limit order, Market order, or Stop limit order
  7. If you want to short Bitcoin, use the right column, “Margin sell BTC.”
  8. Select Borrow, and you can see the available balance to short. In our case, we have a 0.03BTC balance and can short 3x leverage (0.09 BTC)
  9. Also, you can see the “Borrowing amount”

How to short Bitcoin on Binance Spot margin trading with 3x cross margin leverage screenshot

2. Shorting on the Binance futures market

Futures trading allows you to choose between 2 different options: USDT or COIN-dominated. USDT can be traded with up to 125x leverage, with no expiration date. 

COIN-dominated futures can be changed with up to 125x leverage, with or without an expiration date. Read about how to trade Binance futures.

How to short on the Binance Futures Market?

  1. Signup and create an account
  2. Deposit Funds and transfer funds into USDT-M or COIN-M futures account.
  3. Go to “Futures” and Select USDT-M or COIN-M futures. We use USDT-M futures in this example.
  4. Select Isolated or Cross margin.
  5. Set your leverage 1-125x
  6. Use Limit, Market, or Stop Limit order
  7. Set your position size and hit the Short/Sell button.

Shortselling Bitcoin on Binance futures market with 25x isolated leverage screenshot

3. Shorting Bitcoin with Binance leveraged tokens

Binance leveraged tokens

Binance is one of the best crypto trading sites for leveraged tokens.

These are tradable assets that give you leveraged exposure to the underlying asset. The significant advantages of leveraged tokens are

  • You can get into a leveraged position without collateral.
  • There is no need for maintaining margin maintenance.
  • There is no worry about the liquidation risk.

Below, you can see what fees are associated with Binance leverage tokens, and they all can be traded with up to 4x leverage.

Trading fees associated with Binance Leveraged Tokens

  1. Trading Fees:  Identical to spot trading
  2. Subscription/Redemption Fees:  0.1% per subscription.
  3. Management Fees: A daily management fee of 0.01% will be charged at 00:00 UTC and taken from the leveraged token.
  4. Funding Fees: Funding fees are paid for the borrowed funds to leverage the Binance Tokens. Binance takes no fees for funding rate transfers; these are directly between traders.

How to short Bitcoin with the Binance leveraged tokens?

  1. Signup and create an account
  2. You find the Binance leveraged tokens in the bottom of their homepage. For some reason they have excluded the leveraged tokens from the top menu.
  3. Here you find all the listed tokens as seen in the screenshot below.
  4. You click on the BTCDOWN trading product to short Bitcoin with Binance leveraged tokens.

How to short Bitcoin on Binance with leveraged tokens

 

How to short on Binance without leverage?

Yes, you can short on Binance without any leverage. You select the trading instrument and the trading pair you want to trade and go for 1x leverage.

Binance fees for shorting Bitcoin

Yes, Binance charges fees for shorting Bitcoin on its platform. The short-selling cost depends on which product you use for shorting and what leverage you use. Read more in this article, where Binance Trading Fees are explained.

Binance Crypto Trading Exchange – Is it Legit and Safe?

A padlock for Binance security if its safe and legit

There are different approaches regarding regulations among the other crypto trading exchanges. For example, while Kraken and Coinbase have chosen to be 100% compliant and the US regulated from the beginning, Binance and Kucoin have focused more on delivering products between Defi and CeFi.

However, Binance is approaching the regulated arena more and more. 

Read more about the Binance crypto trading exchange and its legitimacy and regulations in our Binance trading review.

What is a Bitcoin Short Squeeze?

A hand squeezing a lemon representing a short squeeze trade on Binance

Bitcoin short squeeze is a situation in which the BTC price starts to go up drastically. It is when short orders incur losses and traders try to close their positions. In most cases, you will be forced to incur a loss since these jumps are rarely stable. To hedge Bitcoin positions against such price movements, always leave the stop-loss function, indicating the price level at which you will incur an acceptable loss.

What are the Risks of Shorting Bitcoin?

Exclamation sign for risks associated with shorting Bitcoin on Binance

In conclusion, we must stress that shorting Bitcoin risks should not be ignored. 

Crypto trading risk management is one of the top three things you need to master before you get a profitable crypto trader.

You are betting that BTC’s price will drop in the future. However, trends may not go as planned for various reasons. Here are risks you should look after while shorting Bitcoin:

  • Bitcoin price growth forces losses on your account
  • Sharp price spikes can trigger liquidation function
  • If the price is stable, rollover fees can kill your profitability rate
  • Using a high leverage rate means the liquidation price rate would be too close to the price you have begun with

Your capital is always at risk when trading

Best Crypto Trading Platforms for Shorting Bitcoin

➤Binance offers the most trading features, the lowest fees, and the highest trading volumes.

➤Bybit offers among the highest trading volumes for the derivative market, great trading features, and decent trading fees.

➤Kucoin offers many markets, limited trading volume for derivatives, and low trading fees.

➤Gate.io offer the most listed derivative markets, decent trading fees, and decent trading volumes.

*Shorting is possible through leverage trading instruments like margin trading, futures trading, perpetuals contracts, and leveraged tokens. Read more about the best crypto leverage trading platforms.

Best Offers

*Terms and conditions apply. Read more on Offers page.

Hot Articles