What is the difference between short selling and short covering in the context of cryptocurrency?

1 answers

• Dec 16, 2021 · 3 years ago
  Short selling and short covering are important concepts in the world of cryptocurrency trading. Short selling involves selling a cryptocurrency that you don't actually own, with the expectation that its price will decrease. This is done by borrowing the cryptocurrency from someone else and selling it on the market. Short covering, on the other hand, is the process of buying back the borrowed cryptocurrency to close the short position. Short selling allows traders to profit from a decline in the price of a cryptocurrency, while short covering is necessary to close the short position and avoid potential losses. It's important to note that short selling and short covering can be risky strategies, as the price of a cryptocurrency can be volatile and unpredictable. Traders need to carefully monitor the market and make informed decisions when engaging in these practices.
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