Shorting Bitcoin and Leaving Panic behind
That is up to you, of course!!! It’s risky-business!
There’s been talk about shorting bitcoin in the news!
We’ll what exactly does that mean?
First of all, to “short” it means betting that its value will go down. We’ll such bets have resulted in huge losses in the stock market, and even drove some people to suicide, particularly, back during the twenties when many owners dumped their stocks due to panic as stock prices went down. Some of you may also know that huge investors in certain stocks actually caused panics in the market place by forcing prices down just to cause the outsiders to hurry and dump stock, which in-turn allowed these investors to rebuy the same stock at a lower-price. Thus the term “bear market” vs “bullish market”, which shows rapidly-soaring prices.
A bitcoin bears that the value will go down
Since 2013, the value of bitcoin has risen by 631% (denominated in dollars). Lots of people think that means we’re in a bitcoin bubble and it will eventually pop. A bitcoin bear would like a shot as bursting what they are hoping is going to be a bubble that pops!
The usual way to short a currency is to use a currency pair, i.e. like EUR/USD (the value of a euro is denominated in dollars, which trades as a single unit). For example, if the euro was trading at $1.5000, you would “borrow” a currency pair from your broker, which you have to return within a certain period of time, and sell it on the open market. You will have pocketed $1.50. Then after an hour or so, when EUR/USD is trading at $1.4950, you can buy the currency pair at that price and return it to your broker, making a profit of $0.0050. It can be a risky bet, as you may lose!
Read more on Bloomberg.com on “how to short bitcoin” here
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