Bitcoin is the first decentralized digital currency. It is a digital coin that you can send or
trade through the internet with your computer or smartphone locally or internationally
without a compromising financial institution. It is based on an open-source, peer to peer
internet and nobody owns it. The rise of bitcoin has developed media frenzy.
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Since the beginning of 2013, the value of bitcoin has risen by 631% which is
denominated in dollars. Plenty of people think that means good news but the company
will not make it easy for you to “short” or bringing down its value if you’re one of these
bitcoin bears. We will discuss here some tips on how to short bitcoins if it necessary.
Using a currency pair is the common way to short a currency like for example EUR
and USD, where the value of a euro denominated in dollars are trade as a single unit.
Here is an example to make it clearly; if the euro was trading at USD1.3000, you would
“borrow” a currency pair from your broker that you need to return within a certain period
of time, and sell it on the open market, taking $1.30. If after about an hour the trading of
EUR/USD is at $1.2950, you can buy the currency pair at that price and return it to your
broker, earning a profit of $0.0050. But make sure you won’t get wrong, because if you
do, you lose out.
Other two notable ways to short bitcoins are through a) ICBIT where it allows traders to make bets using futures. With this, you can make profit without buying the actual
bitcoins themselves because futures contracts can be bought and sold. ICBIT also allows
you to trade commodities in bitcoins such as oil. b) Bitfinex, a Hong Kong based bitcoin
exchange, allows ordinary bitcoin holders to act like brokers and lend bitcoins to those
who want to trade them.