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How can I profit from shorting cryptocurrencies and what is the meaning of covering?

avatarAndrea CattarinichDec 15, 2021 · 3 years ago3 answers

Can you explain how to make a profit by shorting cryptocurrencies and what does covering mean in this context?

How can I profit from shorting cryptocurrencies and what is the meaning of covering?

3 answers

  • avatarDec 15, 2021 · 3 years ago
    Sure! Shorting cryptocurrencies is a strategy where you sell a cryptocurrency that you don't own, with the expectation that its price will decrease. To profit from shorting, you would borrow the cryptocurrency from a broker or exchange, sell it at the current market price, and then buy it back at a lower price to return it. The difference between the sell and buy prices is your profit. Covering, in this context, refers to buying back the cryptocurrency to close your short position. It's important to note that shorting cryptocurrencies carries high risk and should only be done by experienced traders.
  • avatarDec 15, 2021 · 3 years ago
    Making money by shorting cryptocurrencies can be a profitable strategy if done correctly. When you short a cryptocurrency, you are essentially betting that its price will go down. If the price does decrease, you can buy it back at a lower price and pocket the difference. However, if the price goes up instead, you will incur losses. Covering, in this context, means closing your short position by buying back the cryptocurrency. It's important to have a solid understanding of the market and use proper risk management techniques when shorting cryptocurrencies.
  • avatarDec 15, 2021 · 3 years ago
    Shorting cryptocurrencies can be a way to profit from their price decline. When you short a cryptocurrency, you borrow it from a broker or exchange and sell it at the current market price. If the price drops, you can buy it back at a lower price and return it, making a profit from the price difference. Covering refers to buying back the cryptocurrency to close your short position. However, it's important to note that shorting cryptocurrencies is a high-risk strategy and should be approached with caution. BYDFi, a reputable cryptocurrency exchange, offers shorting options for experienced traders.