How to Long / Short Crypto Coins: A Beginner’s Guide
Disclaimer: The Industry Talk section features information from players in the crypto industry and is not part of the editorial content of Cryptonews.com.
If you are new to crypto trading, the endless amount of jargon can seem overwhelmingly intimidating. In this article, we’re going to cover one of the most important ones you’ll see all over the place: how long / short crypto coins.
There are two types of crypto trading positions: long positions and short positions. Traditionally, these terms have been associated with hedge funds. But increasingly, they are used in conjunction with cryptocurrencies.
Explain the difference between a long strategy, a short strategy and a long / short strategy
A long investment strategy, often referred to as “going long,” means that you buy an asset up front with the expectation that it will increase in value. An example of this would be buying Bitcoin or Ethereum in a market and holding it in the hope that its value increases.
A short investment strategy, often referred to as “taking a short position,” means that you are borrowing the asset instead of buying it directly. This is usually done when you expect the value to drop because you can sell the asset for a high price and then pay your lender at a lower rate after the values go down – then you can keep the difference to yourself – same.
As you may have guessed, a long / short strategy is basically a combination of these two strategies. This means that you take a long position in assets that you expect to increase in value and a short position in assets that you expect to lose value. And you take advantage of both.
What is a successful long / short crypto strategy for beginners?
The best strategy is one that allows you to diversify your investment portfolio. Because crypto coins are so volatile, you ideally want to do a little bit of lust and shorting.
To ‘go long’ you want to look for cryptocurrencies with long term profitability. These are probably the most popular and well-known coins with a large market cap, such as Bitcoin and Ethereum.
Long story short, you want to look for cryptocurrencies that will allow you to profit quickly from price drops – think memecoins like Dogecoins, which go up and down based on Elon Musk’s tweeting habits!
Motley Fool co-founder David Gardner shared some great advice for new traders a few years ago. It can be applied to any type of trading – but it is particularly suited to crypto trading:
“Stocks always go down faster than they go up, but they always go up more than they go down.”
Take the time to study some crypto price charts, and you will notice that a lot of them tend to follow this rule.
There are two types of crypto markets where you can use long / short crypto strategies: derivatives markets and spot markets.
A spot market is the most common type. It allows users to buy and sell cryptos at any time, but also has limitations: traders will only earn money if the price of an asset increases; if the price of an asset goes down, they will lose money.
The derivatives market, on the other hand, is based on speculation. A derivative is essentially a secondary contract that derives its value from the performance of an underlying asset. You may have heard of crypto futures, crypto options, and perpetual contracts – these are the most popular crypto derivatives.
For example, you might believe that the price of Bitcoin will go up, while someone else thinks it will go down. You both sign a contract. After a period of time, once the price has changed, one party will be required to pay the other party the difference in price.
Over the past two years, there has been a sharp increase in the crypto derivatives market. In May 2021, he reached its peak with a total transaction volume of $ 5.5 trillion.
It can be difficult to find a decentralized derivatives trading platform suitable for beginners, which unfortunately ends up distracting many people from the space. Fortunately, that is about to change.
Platforms such as SynFutures strive to overcome the limitations of centralized derivatives exchanges and push the boundaries of the industry by creating next-generation crypto derivatives platforms suitable for beginners. Since its inception in early 2021, SynFutures has grown rapidly. In January, he raised a US $ 1.4 million round of funding – then in June, he raised a round of US $ 14 million in Series A.
SynFutures allows users to create asset pairs without authorization and take leveraged long or short positions depending on anything. This includes BTC, altcoins, gold, hash rates, NFTs, and also real world assets. Any project can create their own futures market with a margin in project tokens, and any user can list trading pairs in as little as 30 seconds.
For more tips on how to long / short crypto coins, and to be part of a vibrant community of members helping each other on their investment journey, join the SynFutures Community on Telegram.