Shorting Bitcoin with Futures

Margin trading of futures allows you to buy and sell Bitcoin futures using funds that could exceed your account balance. Spot margin trading involves buying or selling the actual underlying assets, instead of financial contracts – as is the case with futures and derivatives like CFDs. What are the advantages and disadvantages of this trading method?


Pros and Cons

Although Maring Trading is popular a among investors, like all instruments, they come with both advantages and disadvantages.

Advantages👍

📈 Long and Short
With Margin Trading, you can speculate on the price movements of Bitcoin, both upwards and downwards. This means you can make money in any market, including a bear market.

 

💸 Transaction costs
Margin trading incurs relatively low transaction costs, making it attractive to investors with limited budgets – looking for bigger impact.

 

💰 Low capital requirements
Due to the relatively low initial capital required for Maring Trading, it is accessible to a relatively wide range of potential traders. The trader is only required to keep the collateral in place, to maintain the margin position. 

 

➕ Leverage your profits
Trading with larger amounts than your account balance, may result in higher profits.

 

🕗 Flexibility
Unlike futures, Margin Trading does not involve a fixed expiration date, and you can trade 24/7, opening and closing trades quickly.
To limit potential losses and manage transactions, traders can use stop-loss orders, among other methods to mitigate risk.

 



Disadvantages👎

➖ Leverage/margin

Leverage or margin trading is a two-edged sword. It amplifies profits when the trade goes in the desired direction, but works equally so when the market is moving against you.


🧐 Unregulated brokers

Some Bitcoin trading platforms may be of questionable nature. It requires some due dillegence to confirm the regulatory status of a trading platform before .

Regulated trading plaforms that offer margin trading

If you decide that margin trading is your prefered instrument to short Bitcoin, you may consider using a regulated platform like Kraken (more information on Krakens licence and regulation situation) or Binance (read more about the regulatory status of Binance in your jurisdiction).