PrimeXBT Retrospective: Why Traders Short Bitcoin

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During a bear market, it is commonplace for traders to discuss short positions and strategies around shorting Bitcoin for a profit or to protect capital against falling prices.

In this retrospective report, PrimeXBT has provided historical crypto market data to explain the growing popularity of shorting Bitcoin and other cryptocurrencies.

Spot exchanges see a flood of new users during a bullish trend in cryptocurrencies. It isn’t out of the ordinary during such a phase to find Coinbase trending on Apple’s App Store. 

But when the trend turns bearish, spot trading volume dries up, and users flock to derivatives trading platforms to long, or more specifically, short Bitcoin and altcoins.

Going short Bitcoin blew up in early 2018 as the top cryptocurrency plummeted from $20,000 to an eventual low of $3,200. At the time, BitMEX was among the only platforms available offering short positions on crypto.

That year, however, demand surged for crypto derivatives. PrimeXBT and several other brands launched during the 2018 crypto winter. These same brands are once again thriving while spot exchanges fall like dominoes, and it is all due to demand.

When bear markets put a strain on portfolios, smart money goes short to trade with the trend. The reason why spot exchanges struggle is because users only have the option to move into cash and wait.

Shorting Bitcoin and other cryptocurrencies lets traders make money on the way down during a downtrend rather than seeing capital levels deplete rapidly. 

Going short Bitcoin also works as a hedging strategy, with returns offsetting losses related to any long-term spot positions held.

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