Short Selling
Short selling, also known as ‘shorting’, refers to when a trader opens a ‘short’ position on an asset, such as a cryptocurrency. Shorting an asset simply means selling the asset at its current price with the plan to buy it back after some time when its price drops.
Short selling is usually performed by experienced traders who try to capitalise on an anticipated drop of an asset’s market value. In this case, a short seller borrows an amount of the asset against collateral and sells it immediately. Then, they buy back the same amount of borrowed assets when its price drops to pay back the borrowed assets and borrowing fees, making a profit off the difference between the prices.
Learn more about Bitcoin shorting.
Key Takeaway
Short selling is a form of advanced trading of assets, where a ‘short’ position is opened on an asset when the trader anticipates a drop in its price; a short sell is only profitable if the asset’s price decreases.