How to make money on the fall of bitcoin?
Why is Bitcoin falling? What are the reasons for the fall of bitcoin? How to make money on the fall of bitcoin? What is a CFD broker with cryptocurrency trading?
Make money on the fall of Bitcoin as easy as it is on the price increase. In this detailed guide, you will learn how you can make a profit on the fall in the price of bitcoins.
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Why is Bitcoin falling?
First of all, it is necessary to determine the reasons for the fall of bitcoin. The following factors play a role here:
- News / emotions.
- Technical analysis.
- Manipulation by whales.
If there is bad news related to bitcoin or cryptocurrency in general, the price of Bitcoin will fall because someone decides to sell on emotion. For example, a ban has been imposed on bitcoin trading in a certain country, in which case the price of BTC may fall for some time. When the MtGox exchange was hacked, bitcoin fell by 23% in a very short time. And after the news about the new COVID-19 strain appeared, the price of bitcoin fell by 8% per day.
With this method of price forecasting, many traders look at the same signals. This ensures that many of the same decisions will be made at a certain time because everyone is looking at the same charts. If the support level breaks, many traders will decide to sell cryptocurrency at the same time, which will lead to a drop in bitcoin.
Manipulation by whales
Whales are people who have a lot of bitcoins, and if you have a lot of them too, you can use this position to manipulate the market.
An example of this is that, being a whale, you suddenly sell a lot of bitcoins at once. This creates panic in the market. In this chain reaction, more and more people decide to sell, even morelowering the prices. Keith's goal is to let the price drop to the point where he can buy back his bitcoins cheaper.
How to make money on the fall of bitcoin?
The easiest way to make a profit during the fall of bitcoin is a CFD or a contract for difference. Buying or selling CFDs, you do not own bitcoins, but you earn on the growth or fall of the base value of the cryptocurrency.
With CFDs, you can open long positions (buy when the price rises) and short positions (sell when the price falls). Everyone understands how to buy, but how to sell what you don't have?
When you open a short position, you borrow the value from your broker and sell it immediately. When you close a deal, you have to return the borrowed value to your broker, but since the value has fallen, you can buy it back cheaply and put the difference in your pocket. All this happens automatically when you click the sell button at your broker.
Consider a simple example. Suppose we borrowed a bicycle from you, which at that time costs 100 euros, and immediately sold it to another for 100 euros. Then a new bike model appeared on the market, which means that your bike will cost only 80 euros. We bought your bike at a new price of 80 euros and returned it to you, putting 20 euros in our pocket as a profit.
The main steps to make money on the fall of bitcoin
To start making money on the fall of bitcoin, you need to take the following steps.
Step 1. Choose a broker with cryptocurrency trading
On the cryptocurrency exchange, you can only earn on the growth of cryptocurrencies, so you need a CFD broker with bitcoin trading. On our website there is a large selection of reliable cryptocurrency brokers with CF tradingD. Choose one of them and open an account with him.
Step 2. Wait for the signal and open a sale
It can be negative news or technical analysis. You can set a pending sell order when a channel or support level is broken.
CFD brokers usually offer leverage on cryptocurrency trading. This will allow you to open a position in a larger size and get more profit. But keep in mind that in case of failure, the losses will also be greater than during trading without leverage.
Step 3. Close the deal and lock in the profit
After you have opened a sell trade, set a stop loss and take profit so that your trade closes automatically when the set level is reached. Technical analysis will also help you with this. Identify the key support and resistance levels from which the price has repeatedly bounced, and set orders at these levels.
With CFD brokers, you can earn on any fluctuations of cryptocurrencies, both during the rise and fall of prices. Now there are a lot of CFD brokers with a large selection of cryptocurrencies with leverage, low commissions and the ability to replenish the account directly from a cryptocurrency wallet.
Read also the article "What are stablecoins?".