It’s no secret that cryptocurrency is volatile. Prices can fluctuate wildly from one day to the next, and even the most seasoned investors can find themselves caught up in the rollercoaster ride.
But what if you could make money from cryptocurrency without having to put your capital at risk? Enter: shorting crypto on Coinbase.
What is shorting crypto?
In traditional markets, shorting (or “short selling”) is a trading strategy that allows investors to profit from falling prices. Here’s how it works: let’s say you think the price of XYZ stock is about to drop. You could borrow shares of XYZ stock from a broker and sell them at the current market price.
Then, when the price falls as you expect, you buy back the shares at the lower price and return them to the broker. The difference between the price you sold at and the price you bought back at is your profit.
Shorting crypto works in a similar way. The main difference is that, because cryptocurrency is not regulated in most jurisdictions, there’s no formal process for borrowing and selling crypto assets.
Instead, traders who want to short cryptocurrency typically do so by opening a margin position on a cryptocurrency exchange.
A margin position lets you trade with leverage, meaning you can control more assets than you have capital for. For example, if you have $1,000 in your account and open a 2x margin position on Bitcoin (BTC), you’re effectively controlling $2,000 worth of BTC.
If the price of BTC falls by 10%, your $2,000 position would lose $200 but your $1,000 account would only lose $100—giving you a profit of $100. Of course, if BTC prices rise instead of fall, you would incur a loss.
How to short crypto on Coinbase
Coinbase offers margin trading in select jurisdictions for certain cryptos, including BTC, Ethereum (ETH), Litecoin (LTC), and 0x (ZRX). Here’s a step-by-step guide to opening a margin position on Coinbase Pro:
1. Sign up for a Coinbase Pro account and complete verification.
You’ll need to provide your name, email address, phone number, proof of ID, and proof of address.
2. Deposit funds into your account.
You can do this via bank transfer or by buying crypto directly on Coinbase Pro with a credit or debit card—just note that credit and debit card deposits are subject to higher fees than bank transfers. Once your deposit has been processed (which can take several days), it will appear in your account balance.
3. Navigate to the “Products” page on Coinbase Pro and select the crypto pair you want to trade—for example BTC/USD or ETH/USD—from the list of available pairs.
Then click “Trade” in the top right corner of the screen.
4 . On the “New Order” screen , select “Market” from the “Order Type” dropdown menu , enter how much of the asset you want to buy or sell in either USD or crypto units in the “Amount” field , then click “Sell
Your order will be placed immediately , and once it ’ s filled , it will appear in your “ Fills & Orders ” section under “ Positions .” From here , you can monitor your position ’ s P&L , set stop orders , and close out your position when you want .
Can You Short Crypto on Coinbase?