How to Short Crypto? Beginner's Guide to Short Selling Cryptocurrencies

The crypto market has never been a place of disappointment. In minutes, prices may soar up, and just as fast, prices may plummet. Whereas the majority of the population enters the world of cryptocurrency with the hopes of making a successful purchase at a low price and selling it at a higher price, some seek to make a profit even when the market experiences a decline. That is where shorting crypto enters the picture.

You may hear traders stating that they are short on Bitcoin or Ethereum but what the heck does that imply? And how do you do it without being wrecked by a price sudden rise?

This article will simplify all you need to know about shorting cryptocurrency, including what it is, how it works, the platforms available, and the risks of shorting cryptocurrency. Alright, so let us begin.

Key Takeaways

• Shorting crypto means betting against the market. You profit when the price of a cryptocurrency falls — by borrowing and selling high, then buying back lower.
• Several tools are available for shorting, including margin trading, futures contracts, options, and inverse tokens — each with different risk levels and complexity.
• Leverage can amplify profits — and losses. Beginners should use low leverage (e.g., 2x–5x) and always set stop-losses to protect their funds.
• Shorting is useful not just for profit, but for hedging. Traders often short to protect their crypto holdings during bear markets or after major rallies.
• Short-selling involves real risk. Liquidations, sudden market pumps, and lack of discipline can quickly lead to large losses if not managed carefully.
• Margex offers an easy way to short crypto, with isolated margin, up to 100x leverage, no KYC, and a user-friendly interface — ideal for both beginners and advanced traders.
• Always use a risk management strategy. Set stop-loss and take-profit targets, monitor your positions closely, and never short more than you can afford to lose.

What Does Shorting a Crypto Mean?

Shorting crypto implies that you speculate the value will decrease instead of increase. Suppose the price of Bitcoin is $40,000. In case you think that it will fall shortly, you may borrow Bitcoin on a crypto exchange or trading platform and sell it at the prevailing market price. Then, when the cryptocurrency price falls, say to $35,000, you repurchase it at the lowered price, give back the borrowed Bitcoin, and keep the difference as profit.

It seems to be magic, yet it is not. It is simply short selling, which is a trading strategy that has existed in the stock market over decades and now found its equivalent in the cryptocurrency market.

Is It Possible to Short Crypto?

Yes, absolutely. It is not that cryptocurrency can not be shorted, quite on the contrary, it is pretty mainstream. Most crypto exchanges and trading platforms currently have features that allow retail traders (that is you and I) to easily open a short position. Nevertheless, it is not that easy as a push of a button. If the market moves against you (meaning the price rises instead of falling), your potential loss can be unlimited — especially if you’re using leverage.

Seven Ways to Short Crypto

Margin Trading

One of the best methods to short Bitcoin is to use a cryptocurrency margin trading platform. Margin trades allow investors to “borrow” money from a liquidity pool to make a trade, which is permitted by many exchanges and brokerages.

It’s important to keep in mind that margin entails borrowing money, which can either increase profits or aggravate losses.

Although there is a real possibility of profit when shorting a volatile asset like cryptocurrency, the amount of risk is substantially higher. In a conventional long position, the currency can only fall to zero, at which point you lose your initial investment. In a short position, the Bitcoin price, for instance, can increase indefinitely — as will your losses.

At this time, many Bitcoin exchanges allow margin trading, with Margex being one of the allowing users to short with up to x100 leverage.

Futures Market

A futures market exists for Bitcoin, just as it does for other assets. In a futures trade, a buyer agrees to purchase a security with a contract that defines when and at what price the security will be sold.

When you buy a futures contract, you’re hoping that the security’s price will grow, ensuring that you’ll be able to get a good deal on it later.

When you sell a futures contract, you’re indicating a negative attitude and a prediction that Bitcoin’s price will fall. You can short Bitcoin in this situation by buying contracts that gamble on the cryptocurrency’s price declining.

You can also short Bitcoin futures on a few exchanges. Margex allows short selling with up to 100x leverage which allows traders to maximize gains on the falling market. Margex is one of the high-leverage platforms available.

Prediction Markets

Prediction markets are another tool for shorting Bitcoin. Cryptocurrency prediction markets are comparable to those found in traditional markets. Investors might make a wager based on the outcome of an event.

As a result, you may forecast that Bitcoin will drop by a specific amount or percentage, and if someone takes you up on the bet, you’ll profit if it happens.

Short-Selling Crypto Assets

Though this technique might not be for everyone, individuals with the stomach for it can profit if their gamble against Bitcoin pricing pays off.

Sell tokens at a price you’re comfortable with, then wait for the price to decline before buying them back. Of course, if the price does not shift as you anticipate, you risk losing money or losing Bitcoin holdings.

Short-selling Bitcoin comes with a lot of fees and risks. For example, you’ll have to pay custody or Bitcoin wallet fees to keep the Bitcoin safe until the transaction takes place.

You’ll also have to deal with the volatility of Bitcoin’s price. You could lose a lot of money if the price goes up (rather than down, as you expected).

Certain exchanges also provide leverage for such transactions. The disadvantage of using leverage is that it has the potential to compound losses.

Using Crypto perpetuals

A contract for differences (perpetuals) is a financial technique that pays out money for settlement depending on price discrepancies between open and closing prices.

Bitcoin perpetuals, like Bitcoin futures, are simply predictions of the price of the cryptocurrency. Shorting Bitcoin is when you buy a perpetual that predicts the price of Bitcoin will fall.
As a result, you’re shorting Bitcoin.

If Bitcoin is trading at $40,000, for example, you could short sell it and close your position when the price reaches $35,000 so you make a $5,000 profit.

Perpetuals have a longer settlement period (since they don’t expire) than Bitcoin futures, which have predefined settlement dates. Bitcoin perpetuals also do not necessitate the cryptocurrency’s actual delivery.

As a result, you won’t have to pay custody fees. Traders can enter into a contract based on Bitcoin’s performance, or its performance relative to fiat currency or another cryptocurrency in specific Bitcoin perpetuals marketplaces.

How Does Short Selling Work in Crypto?

Here’s a basic step-by-step example of how someone might short crypto:

1. Borrow the Asset: You borrow a cryptocurrency (say, Ethereum) from a crypto exchange that allows short-selling.
2. Sell It at Current Price to maximize your profits on the underlying asset.: You immediately sell the borrowed Ethereum at its current market price (e.g., $3,000).
3. Wait for the Price to Drop: You wait, hoping the price movement goes in your favor (say, ETH drops to $2,500).
4. Buy It Back at a Lower Price: You buy it back at $2,500.
5. Return the Borrowed Asset: You give the exchange its ETH back and keep the $500 difference (minus fees).

Sounds easy? It’s not always. You’re working in a highly volatile market where price rises can be quick and unexpected.

How to Short Crypto on Margex: Step-by-Step Guide

Margex is an intuitive crypto derivatives exchange where traders can Long or short Bitcoin and other cryptocurrencies up to 100x leverage. When you anticipate a crypto asset to decrease in price, you can short it on Margex and make a profit when it falls.

This is how you short crypto on Margex, starting with creating an account to exiting a short position in a secure way.

Step 1: Create an Account on Margex

• You will be required to sign up before you can open any trade.
• Visit https://margex.com.
• Press the button with the trading or register text.
• Type your email, come up with a strong password, and validate your account.
• No KYC is mandatory except if you want to verify to increase the withdrawal limits.

Note: It is advised to use a password that is hard to guess, as well as turn on 2FA (Two-Factor Authentication) just in case.

Step 2: Deposit Funds

In order to short crypto, you will be required to deposit funds into your Margex account.

• On the top menu, click on “Wallet”.
• Select the currency in which you wish to make a deposit (e.g., BTC, USDT, ETH).
• Copy or scan your Margex wallet address.
• Move crypto out of your external wallet or exchange.

As soon as the deposit is seen on the blockchain, your balance will be replenished on Margex.

Step 3: Visit Trading Interface

When your funds are at your disposal, go to the “Trade”.

• On the top menu, click on Trade.
• Choose the crypto trading pair to short, such as BTC/USD or ETH/USD.
• On the screen, you will have a price chart, order book and trading panel.

Margex now offers perpetual contracts on the largest crypto assets, such as BTC, ETH, LTC, XRP, etc.

Step 4: Place a Short Trade (Open a Short Position)

Now you’re ready to short crypto. Here’s how:

A. Choose Order Type:

Margex supports multiple order types:

• Market Order is essential for executing buy or sell trades efficiently.: Executes immediately at the current market price: Executes immediately at the current market price.
• Limit Order: Executes at a price you set.
• Stop Market/Stop Limit: Automatically triggers a market or limit order if the price hits a specific level.

For beginners, Market Order is the simplest.

B. Set Leverage:

Choose your leverage level, from 1x up to 100xleverage level, from 1x up to 100x.

• Example: 10x leverage lets you control $1,000 worth of crypto with just $100.
• Higher leverage = higher potential profit AND higher risk.

Be cautious: Start with low leverage (2x–5x) if you’re new to shorting.

C. Enter Your Trade Amount:

Input the size of your trade-in USD or BTC terms.

D. Click “Sell/Short”:

After confirming your settings, click “Sell/Short” to open your position.

You’ve now entered a short position, meaning you’re betting the crypto price will drop.

Step 5: Manage Risk with Stop-Loss and Take-Profit

Risk management is essential in a volatile market.

• Stop-Loss: Automatically closes your trade if the price goes against you.
  • Example: If you short BTC at $40,000, you might set a stop-loss at $41,000.
• Take-Profit: Automatically closes your trade when your profit target is reached: Automatically closes your trade when your profit target is reached.
  • Example: If you want to close your short at $38,000, set a take-profit there.

To set these:

1. Go to the “Positions” section.
2. Click on the pencil/edit icon next to your trade.
3. Set your stop-loss and take-profit levels.

Never skip stop-loss — it protects you from liquidation and heavy losses.

Step 6: Monitor Your Trade

Once your short is live, keep an eye on it through the “Positions” tab for managing your buy or sell orders. You’ll see the benefits of engaging in short selling.

• Entry price
• Current market price
• Unrealized profit/loss
• Liquidation price is crucial to understand when engaging in short selling.

The liquidation price is the point where your position is automatically closed to prevent your balance from going negative.

Step 7: Close Your Short Position

To exit the trade and lock in profits (or losses):

1. Go to your open position.
2. Click “Close” next to your trade.
3. Choose whether to close the entire position or partially.
4. Confirm the action.

Margex will “buy back” the cryptocurrency at the current market price, returning the borrowed asset to the system and crediting or debiting the difference to your account.

Risks of Shorting on Margex

Shorting crypto on Margex is powerful but risky. Key risks include:

• Liquidation: If the market price moves sharply against your position.
• Volatility can increase the risks involved in trading.: Crypto is extremely volatile, and price swings can happen fast.
• Potential Loss: Leverage magnifies both gains and potential losses.
• Overtrading: Margin and leverage can be addictive — don’t fall into the trap.

Why Choose Margex for Shorting Crypto?

Here are a few reasons Margex is a solid choice for shorting: