Cheapest way to short sell bitcoin

[vinciguerra]

I would like to short sell bitcoin long term, mainly to hedge exposure I have from being long bitcoin in my day-to-day hobby.

Of course there are different ways to short sell. Through an exchange, through options, through CFD's, through futures  etc.   I've looked at shorting through an exchange, for example Kraken charges 0,01% every four hours. That sounds competitive, but when you annualize that it adds up to something like 25% of your position value. That might be fine for speculation, but it's really expensive for hedging, so I was looking for something different.

There must have been people before me who had the same question, i.e.: suppose I want to 1:1 short a fixed number of BTC,  which (and where)  is the cheapest way to short?

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[jackg]

A 1:1 hedge is just selling your bitcoin, which will probably always work out cheaper just to do.

I can see why you'd want to hedge in some cases but keeping one open for more then a few months seems like a bad idea, and there probably aren't places that'll do it cheaper.

[vinciguerra]

A 1:1 hedge is just selling your bitcoin, which will probably always work out cheaper just to do.

definitely, i agree.

but, for example, a business that transacts in bitcoin as a potential payment method to and from customers always needs bitcoin available. with this liquidity comes exposure to price movements, which was never your business edge in the first place.  by shorting a similar amount to the amount you hold in stock for liquidity purposes your exposure is effectively zero.  of course, not having bitcoin at all would be better, but then you wouldn't be able to offer your customers said service.  btw, i'm not a business, this is just an example, but it seems to me this is common problem which must have a cheaper solution somewhere than paying 25% of your hedge a year, hence my question.

[adaseb]

Your best way is to just short the actual future contract. Not on spot like Kraken and not the derivatives such as the Perpetual swaps which have a funding fee every 8 hours.

For example if you go on FTX the current price of Bitcoin right now is $47200 but the March price is $48500. And in a couple of weeks there will be a June expiry and on other exchanges there is a Dec 2022 expiry that will come up very soon. They will all have a premium over spot.

So you can hedge that way, benefit from the premium.

[Ararbermas]

Shorting is not an easy task mate wherein there's a chance of massive losses if you don't have enough knowledge how it works, if i were you make research and obtain information to prevent losses because for sure it's very skeptical for a beginners to do shorting and it's because of liquidation as it's the common problem to be honest when it comes shorting. so be aware mate.

[vinciguerra]

Your best way is to just short the actual future contract. Not on spot like Kraken and not the derivatives such as the Perpetual swaps which have a funding fee every 8 hours.

For example if you go on FTX the current price of Bitcoin right now is $47200 but the March price is $48500. And in a couple of weeks there will be a June expiry and on other exchanges there is a Dec 2022 expiry that will come up very soon. They will all have a premium over spot.

So you can hedge that way, benefit from the premium.

Thanks, great advice. Sounds like what I'm after.

[adaseb]

Your best way is to just short the actual future contract. Not on spot like Kraken and not the derivatives such as the Perpetual swaps which have a funding fee every 8 hours.

For example if you go on FTX the current price of Bitcoin right now is $47200 but the March price is $48500. And in a couple of weeks there will be a June expiry and on other exchanges there is a Dec 2022 expiry that will come up very soon. They will all have a premium over spot.

So you can hedge that way, benefit from the premium.

Thanks, great advice. Sounds like what I'm after.

Just pay attention to the maintainance requirement. If you short hedge 1 BTC and you are using a futures exchange that is coin-based like Bitmex. Then if you keep 1BTC on the exchange you will never get liquidated since it’s 1:1 hedge.

So you can keep like 0.5BTC on the exchange and just make sure it’s not close to your liquidation price. This way you are reducing counterparty risk by not holding all your coins on an online exchange.

Usually there is a calculator on most futures platforms where you can calculate your liquidation price. If it’s too complicated then just keep the entire BTC on there.

[Charles-Tim]

There must have been people before me who had the same question, i.e.: suppose I want to 1:1 short a fixed number of BTC,  which (and where)  is the cheapest way to short?

What you meant is that you do not want to leverage but go short so if the price of bitcoin is falling, you will be gaining. The best future trading you can do is to never leverage, just go 1:1 which means you do not borrow, only what will be deducted from you is the transaction fee used and nothing more as you did not borrow any money to leverage.

But, it will be good to think of this very well, opening position in short direction might not be good for long term, it can be better if used for only short term. Not an advice. DYOR.