Crypto Short Selling: The Risks and Rewards of Betting on a Price Drop
Shorting crypto means profiting when its price falls rather than rises. This is the opposite of buying low and selling high, which most people learn first.
On modern crypto platforms, you don't need to borrow or own the coin itself. Instead, you open a short position on its price through derivatives, such as perpetual futures or margin shorts.
A perpetual or margin short is the most common route, with flexible leverage and no expiry date. You can adjust leverage, size your trade, and close it in seconds.
When shorting, you risk losing more than you invest because a price can keep rising without limit. A short squeeze occurs when rapid price rises force shorts to buy back, driving prices up further. To mitigate this risk, set a stop-loss and use modest leverage.