Intermediate
Crypto shorting: how to take a short position in the cryptocurrency market
Short selling trading strategy that allows traders to speculate on the decline of an asset like Bitcoin or other cryptocurrencies . If you want to understand how to short crypto , which trading platforms are best for opening a short position , and what the risks and benefits of this method are, this guide is for you. Discover how to short Bitcoin and other cryptocurrencies, even if you're a beginner in crypto trading .
Table of contents
What is shorting in crypto?
Shorting a cryptocurrency involves selling an asset you don't own, hoping to buy at a lower price and profit from the price difference. This strategy, also known as short selling , is widely used in cryptocurrency trading to profit from market declines or to hedge against a sharp correction.
Short selling allows traders to a cryptocurrency falling rather than rising. This means that if the price drops, the short position becomes profitable: you can buy back the cryptocurrency at a lower price, repay your initial investment, and pocket the difference. Shorting Bitcoin or other cryptocurrencies is therefore a way to downward market trends
Why short cryptocurrencies?
Why short ? Short selling cryptocurrencies you to:
- Speculating on the decline in the price of an asset during a bear market.
- Protecting yourself against market downturns if you already hold cryptocurrencies (hedging).
- Take advantage of advanced trading tools such as futures contracts or CFDs to diversify your strategies.
- Making profits even when the market is trending downwards.
Short selling can amplify both gains and losses. Traders must therefore thoroughly understand the mechanisms of margin trading and leverage before proceeding.
How does short selling cryptocurrencies work?
Short selling in trading involves borrowing cryptocurrency ( such as Bitcoin ) from a trading platform or exchange , selling it immediately at the current price , and then buying it back later at a lower price to repay the loan. The difference between the selling price and the buying price constitutes the trader 's profit .
A simple example: you open a short position on Bitcoin at $40,000. If the price falls to $35,000, you buy back the BTC and make a profit of $5,000 per Bitcoin. But if the price rises, the losses could amount to your entire position.
Shorting Bitcoin and other cryptocurrencies: main methods
CFDs (Contracts for Difference) : CFDs are derivative financial instruments that allow you to short cryptocurrencies without ever owning the underlying asset . You simply bet on whether the price will rise or fall. CFDs are accessible through most online brokers , but they are sometimes prohibited or restricted for retail investors in certain countries.
Futures contracts : Futures contracts are also derivative products . Here, you commit to buying or selling a cryptocurrency at a price fixed in advance, on a future date. They are available on numerous trading platforms or decentralized platforms (such as dYdX or Drift ). They often offer leverage , but require a good understanding of liquidation and margin mechanisms.
Options : Options give you the right, but not the obligation, to buy or sell a cryptocurrency at a predetermined price before a specified date. They allow you to speculate on price increases or decreases, or to hedge against market movements. Options offer great flexibility , but their operation is more complex and they are generally accessible only on specialized platforms or to advanced users.
Margin trading : Margin trading involves borrowing funds to open or long positions leverage . This increases the potential for both profit and loss. This service is offered by many crypto trading platforms (centralized or decentralized), but it requires rigorous risk management.
Exchange-Traded Products (ETPs/ETNs) : ETPs (Exchange Traded Products) or ETNs (Exchange Traded Notes) are exchange-listed products that replicate the performance of a cryptocurrency . Some ETPs allow you to short cryptocurrencies without opening an account on a crypto platform, simply through your stockbroker . They are accessible to most investors, but depend on local regulations and the products available in your market.
Shorting Bitcoin and cryptocurrencies in France: which platforms to use?
Since 2023, short selling of cryptocurrencies via futures contracts has been prohibited on Binance in France. traders must therefore turn to alternative solutions to short cryptocurrencies and benefit from leverage legally and in a decentralized manner .
Decentralized platforms: Drift and dYdX
Platforms like Drift and dYdX allow traders to short Bitcoin and other cryptocurrencies via perpetual contracts centralized intermediary. These solutions operate using smart contract that automatically manage orders , leverage , and liquidity .
How do smart contractwork in perpetuals trading?
- Opening and managing positions : The trader opens a short or long position . The order is recorded on the blockchain via a smart contract .
- Leverage and margin : Platforms like Drift or dYdX allow the use of leverage (for example, 10x) to short or trade with capital exceeding the initial investment. The smart contract continuously monitors the available margin and liquidates the position if the balance becomes insufficient.
- Automatic liquidation : If the market moves against the trader , the smart contract closes the short position to limit losses .
- Funding rate : A periodic funding rate keeps the contract price close to the spot price. Short traders pay or receive this rate based on supply and demand.
- Liquidity management : platforms use liquidity pools or an off-chain order book (like dYdX ) to quickly execute orders .
- Security and transparency : All transactions are recorded on the blockchain. The user retains control of their wallet and funds.
Why are these platforms an alternative to Binance Futures?
- They offer the same features: leverage , short , trading , without a central intermediary.
- DeFi guarantees more transparency, control over funds, and less risk of manipulation or blocking of withdrawals.
- Secure trading and the transparency of smart contract reassure both experienced traders beginners .
Drift : a decentralized trading platform on Solana
Drift is a perpetual trading platform on Solana , Solana for its low fees and speed. To short on Drift , simply connect your wallet , deposit USDC USDC and choose your cryptocurrency . You can then open a short position with leverage up to 10x or more, depending on the pair.
- More than 50 crypto available, including bitcoin , ETH , SOL and many Solana .
- trading fees : -0.01% for makers and 0.1% for takers, reduced thanks to the FUEL program.
- Prediction market (BET) and yield options via liquidity or vaults.
- Reliable trading, fast execution and decentralized position .
For more details, see our detailed guide on Drift Protocol works .
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dYdX : the reference DEX for Shorter Bitcoin and Cryptos
dYdX is the most popular decentralized platform trading perpetual contracts. Initially on Ethereum , it now operates on its own blockchain ( dYdX Chain) based on Cosmos, with a Proof-of-Stake model.
- Over 200 active perpetual markets, leverage up to 50x on major cryptocurrency .
- trading fees : 0.5% max for takers, 0.1% for makers, reduced via staking DYDX token .
- order execution , near-instantaneous completion, and decentralized order book.
- Total control over funds via your portfolio and security ensured by a network of independent validators.
For more information, see our article on how to use dYdX .
What are the risks of shorting crypto?
Short selling cryptocurrencies carries major risks :
- Leverage : it can amplify gains , but also losses. If the position moves against you, you can lose your entire margin, or even more in the event of liquidation.
- Volatility: Price movements are sometimes extreme in the cryptocurrency , which can lead to rapid liquidations.
- Trading fees: each transaction involves fees, which are added to the cost of the funding rate.
- Technical risks: bugs in smart contract wallet handling errors .
Beginners and traders alike should always manage their risk, use leverage , and never commit more capital than they can afford to lose.
Summary: How to short cryptos in 2025?
- Short selling allows you to speculate on the decline of a cryptocurrency like Bitcoin .
- To short bitcoin and other cryptos , you can use CFDs , futures contracts , options , or decentralized platforms like Drift and dYdX .
- Decentralized platforms offer reliable , transparent, and secure trading
- Margin trading and leverage allow you to open short positions with limited capital, but shorting can also increase losses.
- Pay close attention to trading fees , risk management, and market volatility.
By understanding the mechanics of short trading , you can short Bitcoin and other cryptocurrencies in a decentralized, transparent environment tailored to today's traders Discover how to short cryptocurrencies on Drift and dYdX , and take advantage of advanced trading tools profit in all markets, whether rising or falling.
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Yoann
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
