Im tempted to short if I sense that the price is way too high and a correction may follow. Of course we are far from that, I suspect we will have an epic rally during the halving, but then comes the question: To sell during the halving in hopes a correction happen to buy more Bitcoin, or to just hold it?
The end goal is obviously to get throught it with more Bitcoin, I don't want to stay in fiat since that's suicidal long term, anything that isn't Bitcoin long term is a waste of time, but I don't know if I should short. What if you sell at $1,000 but it keeps going up and you are left out? where do you even buy back? I can see a lot of people deeply regreting trying to short when the price starts raising fast.. it's a big gamble.
It sounds like your end goals are broadly the same as mine. I
wouldn't short.
What I would do instead is either sell call options or buy put options.
Buying puts, you spend a fixed amount of BTC and then profit when the price falls (or lose all of your initial investment if price doesn't fall). There's a saying in options trading - no one ever got rich buying options. Which leads me to...
Selling calls, you immediately make a fixed amount of BTC. However, if price rises you can suffer a theoretically infinite loss. However... you can prevent this by buying an equal number of puts, with a higher "strike price".
As an example, right now BTC/USD price is around $460. Let's assume that this is an ATH (willing suspension of disbelief required - forget about December 2013!) and we expect price to fall. The current asking price for a call with a $460 strike price (on
Coinut) is 0.001446 BTC - that's for a contract worth 0.1 BTC. You sell 10 of these, making 0.01446 (minus a commission to the exchange). That looks like instant profit, but if the price rises that "profit" will evaporate. To prevent this, you also buy a call, this time with a higher strike price. A call with a strike price of $475 costs 0.001292 (that's the asking price - you could place a lower bid and hope a seller accepts your bid). Buying 10 of these will cost you 0.01292 - meaning you've made 0.00154 BTC. If price does rise, then your losses are limited. This is obviously just an example, and I am not saying that this is a good idea at this time! You might also want to trade more than 10 contracts - or less.
I like options because I can enter a position knowing exactly how much I could lose (or profit). I like that I can hedge like this, and holding an opening position doesn't give me sleepness nights. I couldn't say the same about shorting!
What I don't like about (BTC) options is the lack of choice with respect to exchanges. Coinut is currently the only exchange offering "vanilla" options (the kind I've discussed above). Other sites offer "binary options", which seem to me to be much closer to gambling - win a fixed amount if the price goes up, regardless of how much it goes up. There's an exchange called Quedex which is opening "soon", and has been so for several months. Coinut has been
controversial on BCT recently - they messed up their signature campaign payments, and were slow in rectifying that. I left the campaign, and withdrew my BTC from their site. I'm monitoring things, and may well trade there again - until the recent problems I'd not had any problems there.
