On short selling

[deisik]

What matters in the long run is the fundamentals of bitcoin, whether the network is functional or has improved, whether people still see utility in bitcoin as a store of value and currency, and whether adoption has increased or not. Thus, short term price swings that are caused by people trading on leverage or shorting the market shouldn't really do much in the long term, as it doesn't influence the fundamentals whatsoever

I see your point and I mostly agree with it

Nevertheless, your last claim can in fact be challenged in a meaningful way. You basically say that shorts don't affect Bitcoin fundamentals, but that remains to be inspected further. For example, you say that utility in Bitcoin as a store of value and as a currency are two elements of these fundamentals. But you can't deny that shorts add to volatility while volatility is totally incompatible with Bitcoin being a store of value and a currency. In this manner, you can't actually say that shorts don't affect Bitcoin fundamentals. The same with real world adoption (whatever you may mean by this) as volatility is definitely not good for it either

[Kopyleft]

Shorting a currency does not always result in a drop in it's price, if it did everyone would be shorting and getting profit off their investments. I believe short term traders predict a possible drop in the price and take advantage of it rather than causing the drop by selling their holdings.
I am not an expert trader and do not have deep knowledge about the trades and how actions affect the market.

[Zenixin]

Shorting a currency does not always result in a drop in it's price, if it did everyone would be shorting and getting profit off their investments. I believe short term traders predict a possible drop in the price and take advantage of it rather than causing the drop by selling their holdings.
I am not an expert trader and do not have deep knowledge about the trades and how actions affect the market.

mostly they are those who watch the market all day long that they were able to see which coin have enough potential. This time not all crypto increases some keep on dips that why short selling is quite risky.

[deisik]

Shorting a currency does not always result in a drop in it's price, if it did everyone would be shorting and getting profit off their investments. I believe short term traders predict a possible drop in the price and take advantage of it rather than causing the drop by selling their holdings

It all eventually comes down to the balance of supply and demand

And short-selling adds to supply (i.e. someone selling, as the term itself suggests), so if it doesn't result in a price drop, it just means that the amount sold is either too small to make a dent in the Bid side of the orderbook or it is offset by someone else's buy orders eating into the Ask side of the orderbook. If no one is actively buying (beyond matching the selling orders, obviously), selling always leads to a price drop in the end. There is simply no other way about it, and it doesn't matter whether it is short selling or long selling, so to speak

[adaseb]

Short selling exists for many reasons. One of them is actually to provide liquidity to the markets. Another is for the broker/exchange because they earn fees and interest of the borrowed asset.

Many people feel that short selling is "free money" however in my opinion its harder making money as a bear in a bear market than it is making money as a bull in a bull market. One reason is that whenever you go short, you need to pay interest since you are borrowing the asset from someone. Another reason is that price can go up to infinity but the lowest point is $0, so your risk is essentially unlimited.

Unless you were a bear that shorted at $6000 back in November (which I am sure is limited to a small group of individuals) shorting the low in the $3xxx would of proven to be very difficult since we are trading sideways for the last month or so.

You also need to realise that every bear knows that eventually Bitcoin will find a bottom and it might head to a new ATH, and even if it takes a small $500 or $1000 day to realise, they will get scared and cover and cause price to rise, basically a short squeeze.

[exstasie]

You also need to realise that every bear knows that eventually Bitcoin will find a bottom and it might head to a new ATH, and even if it takes a small $500 or $1000 day to realise, they will get scared and cover and cause price to rise, basically a short squeeze.

That's why I love seeing shorts pile up on Bitfinex. It's fuel for the rocket. BTC margin funding was setting all-time highs at the December bottom, and I'm sure that's one reason why we bounced past $4,000 so quickly. It was a classic short squeeze.

We unfortunately don't have high levels of shorts right now. Less than 25,000 BTC borrowed at the moment.

[deisik]

Many people feel that short selling is "free money" however in my opinion its harder making money as a bear in a bear market than it is making money as a bull in a bull market. One reason is that whenever you go short, you need to pay interest since you are borrowing the asset from someone. Another reason is that price can go up to infinity but the lowest point is $0, so your risk is essentially unlimited

It is so in theory

But in practice there is not much difference. Whether you are short or long, you should use stop-losses, and when you use them, it doesn't really matter how short or long you are (pardon the pun). Although it is definitely true that there is no limit for the price to rise while it can't fall below 0, try telling that to someone who bought a couple bitcoins at 20k. Apart from that, 3k is still a huge price. Just think about the rest of the pack at around ~100 dollars per coin in the best case (actually, only BCash at $120 and Ethereum at $110), so there's a lot of room to implode further

You also need to realise that every bear knows that eventually Bitcoin will find a bottom and it might head to a new ATH, and even if it takes a small $500 or $1000 day to realise, they will get scared and cover and cause price to rise, basically a short squeeze

A good short squeeze is excellent fuel for the next wave of shorts

[el kaka22]

The difference between short selling and long is that long has an option of just "buying". Like if you think bitcoin will go up instead of doing long you can just go out there and buy bitcoin, which means the same except the leverage. Short doesn't have that option, there is no just buying a anti-bitcoin or whatever hence long is a bit different than short. Its less risky for the long people. Short on the other hand has leverages, margins and liquidations and many more stuff that makes it riskier.

There is literally a chance of shorting bitcoin today and as soon as it increases 5% you will lose ALL your money, like ALL, you don't have that type of troubles when buying bitcoin and storing somewhere, bitcoin went from 20 thousand to 3.5 thousand and its still not all lost, just most lost, however on shorting you can have ALL lost instead.

[BitHodler]

A good short squeeze is excellent fuel for the next wave of shorts

The only thing I can think of is that people assume that the price will come down again since traders with shorts are forced to buy up the price, and the rest of the market will use it as an opportunity to secure profits.

On the other hand, you are at risk of seeing the price pump well beyond what you believed would be a great entry point for your short, especially when it's the exchange itself trying to get rid of people's positions.

BitMEX is known to trade against their users, so there is all the incentive they need to liquidate unprofitable positions to protect themselves. I'm quite sure that every exchange has a similar form of internal market making bot running.

[deisik]

The difference between short selling and long is that long has an option of just "buying". Like if you think bitcoin will go up instead of doing long you can just go out there and buy bitcoin, which means the same except the leverage. Short doesn't have that option, there is no just buying a anti-bitcoin or whatever hence long is a bit different than short. Its less risky for the long people. Short on the other hand has leverages, margins and liquidations and many more stuff that makes it riskier

No, this is not a real difference

I mean, not in practice. In real life, the trees don't grow to the sky, so while you have a certain price at which your short position will be liquidated (if we talk about naked shorts), it is basically the same as 0 for longs. You can say that if this price is too high, then the whole idea of shorting becomes meaningless, and I would likely agree with that but will also add that it is not particularly different from just "buying" at 20k and holding at 3k. In fact, there is an anti-bitcoin. It is covered shorts which you can hold indefinitely long

There is literally a chance of shorting bitcoin today and as soon as it increases 5% you will lose ALL your money, like ALL, you don't have that type of troubles when buying bitcoin and storing somewhere, bitcoin went from 20 thousand to 3.5 thousand and its still not all lost, just most lost, however on shorting you can have ALL lost instead

What you speak about refers only to naked shorts but covered shorts have the same effect on the market price as the naked ones but without this "short-coming" (pardon the pun)

[Shiversnow]

The most important thing, for now, is safe your capital. we never know how many people are greedy in the crypto world. at least the short term can be used for this moment. even though only 5-10% can take profit better than having to lose more.

Actually, it is hard to secure your capital when you do investment or trading in cryptocurrencies because all of the coins are volatile. I prefer long selling where I can earn 50-60% even it takes to wait but its worth it once you earn huge income.

[palle11]

Shorting a currency does not always result in a drop in it's price, if it did everyone would be shorting and getting profit off their investments. I believe short term traders predict a possible drop in the price and take advantage of it rather than causing the drop by selling their holdings.
I am not an expert trader and do not have deep knowledge about the trades and how actions affect the market.

And to it, I think shorting also would generate more liquidity to the brokers or exchanges as the case may be since it involves not staying long in the market or waiting for lots of profit, and then, re-entrying again. In actual fact, it such practice should bring more gains to bitcoin.

[deisik]

Shorting a currency does not always result in a drop in it's price, if it did everyone would be shorting and getting profit off their investments. I believe short term traders predict a possible drop in the price and take advantage of it rather than causing the drop by selling their holdings.
I am not an expert trader and do not have deep knowledge about the trades and how actions affect the market.

And to it, I think shorting also would generate more liquidity to the brokers or exchanges as the case may be since it involves not staying long in the market or waiting for lots of profit, and then, re-entrying again. In actual fact, it such practice should bring more gains to bitcoin

I agree that shorts might in fact be adding more liquidity to the market

Though I don't see how they could add more gains to Bitcoin over long term. When you open a short position, this creates some selling pressure. It doesn't necessarily drive prices down as it may be offset by a rising demand but it exists. When you close a short position, this creates buying pressure. Again it doesn't necessarily lead to higher prices as it may be compensated by a rising supply. There could of course be other effects as things are never that simple in real life, but all in all, shorts should be inconsequential long term