How to Short Bitcoin? A Beginners Guide

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In this article, we will overlook how to short Bitcoin. Most beginner traders think that you can only profit from cryptocurrency price increasing. The basic belief is that if Coin A goes up in price – you profit, but if coin goes down – you lose money. However, this is a very common misconception between underdeveloped financial instrument traders such as altcoin pairs in small exchanges or just inexperienced traders. This brief guide will teach you what is shorting and how you can short Bitcoin.

What is shorting?

The definition of shorting is borrowing any asset or security and selling it with a belief to later sell it for a lower price and after giving back the security keeping the sell-buy price difference. In the essence one is shorting if he believes that the price is going to go down, however, shorting can be used as a tool for hedging. Usually for borrowing assets from a broker for shorting you need to pay some interest, however, some brokers offer a shorting interest free marking it up in trading fees.

Example of shorting

John is grocery shopping at his local market and sees that bag of apples costs 100 USD. John thinks that the price is far from the real value of the bag. He goes to his friend`s house and borrows a bag of apples. Then he goes back to the market and sells his bag. A week later, he comes back to the market and sees that apples now cost 80 USD per bag. He buys a bag for 80 USD brings it back to his friend’s house. The total outcome of this is that John has earned 20 USD due to the fact that he sold the bag for 100 USD and bought it back for 80 which leaves him with 20 USD difference.

You can short Bitcoin on following exchanges

How to short Bitcoin on BitMEX

Lets image that you want to short Bitcoin. The steps that you need to take are as following:

  • Log in or create your own BitMEX account
  • Select your order type: Limit order will let you set exact buying/selling price, market order will execute trade at current market price, Stop market will place a stop-loss at market price when price reaches your target,  Stop limit will do a limit order with stop-loss, Trailing stop will execute order with set price limit from a floating point, take profit-limit will set an opposite order of your current position at your chosen price and amount, Take profit-market will place an opposite order of your current position at certain point and amount within market price.
  • Place your order and you are good to go! Remember to always adjust your margin.

Disclaimer: Always trade with cautions. This guide is for educational purposes only and is not financial advice. Any content displayed is not encouragement for any specific financial decisions e.g. shorting Bitcoin.

Bitcoin Market Analysis, Tuesday, March 12, 2019.

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Today we look at the Bitcoin market analysis. Currently, Bitcoin is heading towards historical resistance level that caused some of the largest price drops during the current bear market. From the macro market perspective, there are two very likely scenarios and one not so much.

  1. Bullish scenario – We break the resistance and head towards the previous accumulation zone (Highlighted blue box with green arrow). To break this resistance we need high buying volume which in the current market state is highly unlikely. However, there are factors that might act as a catalysator for bullish move initiation (See further text). If the accumulation zone is broken, afterward the bull market is most likely to be ignited. This is a really unlikely event.
  2. Bearish scenario – Heading towards resistance will most likely trigger fast 1-2 candle drop to previous historical accumulation zone. We cannot know how the price will react to further levels. Because there is no historical data that supports any predictions in such market conditions regarding volume and exposure.
  3. Accumulation scenario –  This scenario is the most unlikely one because the resistance line historically has proven to cause rapid movements. Going sideways through resistance like this on such a high timeframe is the most unlikely event. The only viable option would be a small breakout that leads to a retest of the resistance and results in accumulation.

Overall market state: Bullish 30% / Bearish 60% / Sideways 10%

A catalyst for a bullish scenario is recently widely seen bitcoin halving. Halving basically means inflation decrease. Bitcoin block reward will decrease, meaning that less bitcoins are emitting every day which results in a price increase. Closer the halving gets, historically, the more market shifts to a bullish sentiment. Right now we are at the proportional historical point where time until halving/bitcoin price makes a reversal move.

How to Choose the Best Crypto Trading Exchange

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At the moment cryptocurrencies are mostly used for speculation and trading. As you might already know, there is always a need for third-party interference to conduct trading operations. Exchange or a broker usually does the job as long as it is not an over-the-counter market. It is very important to choose the right exchange due to many scams, fraud, hacks, and poor performance exchanges. This article will explain to you how to choose the right exchange and will give you some of the best examples.

Is the exchange safe?

Before choosing any crypto exchange the most important thing is to understand whether or not the exchange is safe. Your funds can get stolen by hackers or scammed by fraudulent exchange owners. It is fundamentally important to choose a crypto exchange that stores its funds in cold storage so it is close to impossible for hackers to move large amounts out of the exchange. See picture of largest cryptocurrency exchange hacks below. You should also remember that funds stored on a self-owned hardware wallet is always safer than storing your funds on an exchange.


Crypto exchange hacks by size. Source: Insider PRO

What trading instruments is the exchange offering?

If you are willing to trade the mayor cryptocurrency pairs, then by this criteria almost every exchange will be suitable for you.  When it comes to mid and low cap altcoins you have to seek for specific exchanges. Also, you must check if the exchange is offering real cryptocurrency trading or derivative trading. Derivative markets usually come with bigger leverage and liquidity but their price usually does not reflect real bitcoin price and often makes different, not synchronized price moves.  

Other exchange specifics

A Very important thing to look for is trading volume and liquidity. For every trade you make, you want to be sure that there is another party willing to do the opposite trade. If the exchange does not have any liquidity you might be left with 10000000 dogecoins that you can not liquidate and tell everyone that you are a “Millionaire”. Usually larger the trading volume is the better. The issue that goes hand by hand with trading volume, is trading platform speed. Some platforms are perfect and run without any ease in moments of huge trading volume, some are just slow and clunky and takes you 5 minutes just to confirm a trade. Coughs *Kraken* Coughs. So it is just reasonable to choose the best volume/performance ratio exchange.

List of most popular exchanges

How to start trading in these exchanges?

You can start your crypto journey by registering and depositing funds in one of these exchanges:

BitMEX is a centralized next-generation crypto-coin trading platform, which supports highly leveraged trading via perpetual and fixed-date contracts. To start trading with BitMEX, click HERE.

HitBTC is centralized and it claims it is the world’s most advanced cryptocurrency exchange. Since 2013, HitBTC has been providing markets for Bitcoin, Ethereum, Litecoin, Dogecoin, Monero, USDT, and more than 300 cryptocurrencies in total. To start trading with HitBTC, click HERE.

Binance or Binary Finance is currently the world’s second largest cryptocurrency exchange, with around $6 billion in assets traded in an average seven day period. To start trading with Binance, click HERE.

Kraken, a centralized US-based cryptocurrency exchange operating in Canada, the EU, Japan, and the US, and “the world’s largest bitcoin exchange in euro volume and liquidity”. Kraken provides Bitcoin pricing to the Bloomberg Terminal. To start trading with Kraken, click HERE.

Bittrex is a secure, reliable, centralized and advanced digital asset trading platform developed for international customers and built on Bittrex’s cutting-edge technology. To start trading on Bittrex click HERE.

Kucoin is a centralized cryptocurrency exchange located in Hong Kong. It currently has 178 coins and 398 trading pairs. The most active trading pair on KuCoin exchange is META/ETH. KuCoin is live since 2014. To start trading with Kucoin, click HERE.

Photo by: goodfreephotos.com

You don’t have to be a coder to safely store your crypto! Guide to Hardware wallets

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Hardware wallets are a must-have item for every crypto owner that wants to keep his coins safe. And you don’t have to be a coder to start using one! Online wallets are often hacked and even some of the biggest exchanges have proven to not be secure. Starting from the Mt. Gox hack ranging to the most recent quadrigaCX CEO “death”. Past events show that the safest way to store your crypto holdings is keeping them in your “sock” also known as offline cold storage or Hardware wallets.

What is a hardware wallet?

By definition, Hardware wallet is a special device that keeps your cryptocurrency private keys in a safe offline device. It is only possible to unlock your wallet with physical access and a 4-8 character alphanumeric phrase. They are immune to computer viruses and private keys cannot be transferred out of them in a plain text format. The most secure and adopted way of storing cryptocurrency is using a hardware wallet.

How do hardware wallets work?

The whole principle of a hardware wallet, as stated before, is to keep your funds safe. Most hardware wallets are USB connectable offline devices that require a password to authorize. You do not have to enter your private key every time to log in but a self-chosen password. Wallet requires physical confirmation for each transaction. This ensures that third-parties can not access your funds remotely. Wallets comes with downloadable user interface software which makes them easy to use. Transactions can be made offline and executed after the host device is connected to the internet ensuring maximum protection. Wallets come with a seed phrase for restoring lost or forgotten password.  

Security risks

Although hardware wallets by themselves are fully tamper proof, hackers often bypass their security using malicious third party devices or uncareful use. Methods for stealing from hardware wallets:

  1. Address swaps – Address swaps do not directly interfere with your hardware wallet. They usually occur when there is a computer virus on your device. Malware functions in a way of swapping transaction address to fake one and sending funds to hackers wallet.
  2. Fake production – Decoy wallets that have different hardware components. Fraudsters use the embedded hardware to remotely access your “hardware wallet”. It is easy to bypass this security issue by buying wallets from their original merchants only.
  3. Third party interference during the delivery process – When a person tampers or interferes with your wallet hardware. Every wallet comes with a tamper-proof sticker. This sticker is a safety measure to see if someone has physically interfered with your wallet.


The most popular hardware wallets


Bestcoininvestments advice on which wallet to choose

Although all wallets are doing their function of securing your funds and are fairly simple to use, you must choose the one which side functions suits you best. I personally am using Ledger Nano S wallet because I never bring it out of my home and the price/performance ratio suited me the best. If you are planning on taking your wallet on the road Trezor would suit you best. If you like to have nice things and you do not care about the price of the wallet then KeepKey is your go to. There is no best wallet and you just have to choose which wallet suits you best!

Ledger Nano S - The secure hardware wallet

Photo by Wikimedia Commons

What is Dash (DASH)? A Beginners guide

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Dash is one of the most well-known cryptocurrencies. The coin was first launched in 2014 under the brand name Xcoin. It was founded by Evan Duffield. The cryptocurrency currently is the 15th coin by total market cap. During the December bull run, it reached a total market cap of 3.4 billion USD. After a year, founders rebranded Xcoin to DarkCoin which resulted in negative media attention. Media constantly linked the coin to the dark web. In 2015 it rebranded to its current name DASH and stayed like that ever since. Additionally, it is very unique and outstanding with its blockchain technology in comparison to other coins. It uses multi-layer blockchain enabling different kind of transactions with each-unique characteristics pegged to one coin. DASH masternodes do all the major decisions on its network. Besides, there are standard nodes and miners that participate in blockchain maintenance.

Masternodes

A Dash masternode consists of 1000 coins. It gives you an annual interest of approx. 7% (measured in the cryptocurrency) which equals 45% of all block rewards. All masternodes receive approx 45% of all the coins created. To keep a Masternode you need a static IP address, at least 1 GB of ram, 10 GB of free disk space and a stable internet connection.

Unique features

Many people think that Bitcoin transactions are anonymous, however, they all can be tracked through public blockchain. However, DASH offers a feature called “Privatesend”. It makes a completely anonymous transaction through the network.  Another feature which is rare in cryptocurrencies is instantaneous transactions. Masternodes ensure these transactions. Due to this fact, it is one of the fastest cryptocurrencies there is.

Governance

Dash governance system introduced us to Decentralized Autonomous Organizations also known as DAOs. Masternodes perform all the governance-related actions within the DAO.  Each master node holds the same voting power and operates like a shareholder in a company. Regular DASH miners have no right to vote or participate in governance. 

Real life implementation

Dash has received a lot of media attention through its lifespan starting from negative darknet accusations to positive news regarding charity events. It all has resulted in widespread recognition of the coin. There have been rumors of food chain giant KFC accepting it as a payment method in Venezuela due to their economic problems and fiat currency instability.

DASH quantified

Currently, there are a total of 5046 known masternodes. The leader is The United States of America hosting a total of 1288 masternodes which equals to 26% of total network weight. The cryptocurrency currently trades in more than 200 exchanges. Top 10 largest dash wallets hold 5.7% of the total amount of the coins. (See picture below)

Dash holders by percentage. Source: chainz.cryptoid.info

Source:

https://en.wikipedia.org/wiki/Dash_(cryptocurrency)#cite_note-Prusty-10,
https://www.dash.org/
https://docs.dash.org/en/stable/introduction/information.html
https://chainz.cryptoid.info/dash/#!rich

Russia`s crypto FUD influence on markets

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Many news outlets have recently posted some controversial headlines about Russia converting their USD reserves to Bitcoin. The initiative behind such an act would be Russia’s willingness to bypass U.S. imposed sanctions using cryptocurrencies. Statement by V. Ginko – a well renowned Russian professor:

Whether or not this is going to happen, it is fundamentally important to understand how this can affect the crypto markets before you do any investment activity.

Difference between exchange and OTC crypto markets

Before we proceed with further analysis it is important to understand the difference between retail and OTC (over-the-counter) markets. The common thing between both markets is that they both allow to buy and sell assets, securities, cryptos etc. The difference is in the way how traders execute their orders. In OTC markets people do their trades in person choosing one explicit party. Exchange markets, on the opposite, use centralized framework and trading system executes order automatically choosing the best possible match for your order.

Why Russia will not buy their bitcoins using an exchange?

Although OTC market seems like a much of a fuss it is better for moving large amounts of money. At the current market stage, crypto has lost most of its mainstream attention and order books are thinner than ever. According to the current data (02.02.2019) of Bitstamp exchange, even 100 million of Russia`s money would inflate Bitcoin price by 25k USD. That makes every next Bitcoin Russia buys more expensive, therefore, they have a large slippage. 10 billion is too many funds even for buying bitcoin gradually due to the low market depth. OTC exchanges almost completely exclude gradual price increase for each bitcoin bought because it is not a centralized system and does not update bitcoin price live. 

Market depth on Bitstamp exchange, Source: 
https://dc-charts.com

Summary: How should I react to this event?

The most likely scenario is that if Russia is going to buy bitcoin – they will buy it in such a manner that does not inflate bitcoin price. Smartest decision would be to not play this event. It is bold to say that this is not going to influence markets use, however, an immediate bullrun, caused by a Russian investment, is highly unlikely. It is crucial to understand that Russian government has not confirmed this, thus, information is possibly published just to cause market FUD. Be smart and evaluate everything you read with rationale. Make sure to read bestcoininvestments news for unbiased analysis and news to dominate the markets!

Source:

https://cryptoslate.com/fake-news-russias-alleged-10-billion-bitcoin-investment/
https://decryptmedia.com/4416/russian-to-buy-bitcoin
https://www.telegraph.co.uk/technology/2019/01/14/russia-plans-tackle-us-sanctions-bitcoin-investment-says-kremlin/
https://bitcoinist.com/russia-ditch-usd-bitcoin-prof/

Photo by Wikimedia commons

Beginners guide for Stablecoins.

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Stablecoins are an essential tool for every crypto trader. Whether you are an investor, a trader or you just like to spend half of your paycheck on dogecoins it is important to hedge your bets in any case of unpredicted events. For example, you would rather like to have your coins in a stable store of value than crypto if US government is deciding whether on not to ban bitcoin. For such an erratic events crypto community has created a solution – stablecoins!

What is a stablecoin?

By the definition, stablecoin is a “Cryptographic asset that is optimized in the means of retaining its value during times of volatility”. In simple words – a stablecoin is like any other coin but with a fixed value. Issued on a blockchain, Stablecoins does not require third parties for a transaction and is fully transparent. They achieve the effect of stability by many different techniques such as backing the coin with stable assets, have a guaranteed right of exchange to other assets or mimicking equity. To really understand the fundamentals of a stablecoin it is best to analyze some practical examples of the most used stablecoins:

Tether: the colossus of stablecoins

In a view of the aforementioned three stablecoins, the most used stablecoins are backed by a fiat currency. Tether (USDT) which is the most used one of all three, is a stablecoin backing 1:1 with USD. It is first of its kind in the means of fiat backed stablecoin and has endured the most widespread adoption. Tether states in their website that it is secure, fully backed by USD, transparent and renounced by media giants such as WSJ, Coindesk and Cointelegraph. As all other cryptocurrencies, tether has blockchain technology behind it, but it is failing at decentralization. Tether Ltd. controls the emission of coins, which consequently has created negative stigma and fraud allegations by the crypto community.

The stablecoin controversy

During the December crypto-market bull run, tether faced wrong accusations of artificially creating tether coins without USD backing. The allegations went on for more than half a year. Tether Ltd. was even subpoenaed by the SEC for an investigation. However, the fraud accusations are now ceased and full tether backing log can be accessed at their website – tether.to. 

Speculating stablecoins

There is a phenomenon that would make Keynes`s head hurt very bad – stablecoin value increase and decrease! Stablecoins are perfect as for market indicators and speculatory instruments for trading. The reason is that due to the fact that they change value proportionally with the crypto-market increases and decreases. When the market is going up stablecoin value decreases, meaning that investors are selling to buy other crypto assets. When the market goes down, demand for stablecoin increases making stablecoin value increase by 0.01-0.03 USD. At first glance, the increase can seem insignificant but if properly leveraged can give immense gains with less risk than trading other crypto assets. Some exchanges have even listed USDT/USDC pairs for trading for speculatory purposes.

Price change of tether during period of one year. Source: CoinMarketCap.com

Tip by BestCoinInvestments professionals: How to keep your wealth stable without using stablecoins?

Aforementioned reasons of possible fraud, third-party trust et cetera can make you afraid of putting your valuable resources in stablecoins. Good news is that there is a solution – creating stability by yourself using leveraged bitcoin markets. The secret of storing stable value with bitcoin is putting exactly the right short position. Shorting bitcoin with 1x leverage will give you stable USD value while still keeping your value in bitcoin. For every 1% increase of bitcoin, you will lose some bitcoin but will retain the same value in USD as your assets price increases. If bitcoin falls in value you will gain more bitcoin filling the losses in your USD value.

Remember!

You must keep in mind that some bitcoin instruments such as inverse perpetual swap contracts have long:short funding rate every 24 hours which results in lost/gained funds depending on your position and overall market situation. Choose your financial instrument wisely minimizing the margin interest rates and funding rebates. This is not financial advice. Do your own research before using the aforementioned technique.

Source:

U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether, available on: https://www.bloomberg.com/news/articles/2018-01-30/crypto-exchange-bitfinex-tether-said-to-get-subpoenaed-by-cftc, accessed 26.01.2019.
Tether, available on:

https://tether.to/, accessed 26.01.2019.
Financial data of Tether, USDcoin, TrueUSD, available on: https://coinmarketcap.com, accessed 26.01.2019.

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