Short on cryptocurrency

Professionals have a major piece of advice for those who traded cryptocurrency for the first time last year: Take your tax prep seriously. The IRS has been zooming in on cryptocurrency reporting with increasing interest in recent years. And the last thing you want is to lose money and time reconciling your tax liability, says Douglas Boneparth, a New York City-based certified financial planner. If all you did was purchase cryptocurrency with U.



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WATCH RELATED VIDEO: How to Short on Binance

Yes, taxpayers must report their cryptocurrency trading to the IRS. Here's how.


Any profit in cryptocurrency trading arises from a price increase or decrease. For instance, after a long climb, a trader might short Bitcoin BTC , betting that there will be a steep price drop before the trend stabilizes, which would allow profit to be made.

Shorting is usually done without directly holding the crypto asset. This involves the trader borrowing an asset in anticipation of a price drop, selling it at a higher price, and then buying back once the price has decreased. The price difference is kept as a profit. To borrow an asset, the crypto trader must use an exchange, which either connects them with a lender or lends assets directly, usually with interest rates.

The trader is therefore only limited by the borrowing caps set by the particular exchange. Because of the option to trade with more assets than one owns, this is the most popular method of shorting, although it comes with its own limitations in the form of commissions and interest rates which detract from the profit made on the price drop.

Futures are contracts requiring the trader to buy an asset at a specified price on a certain date. Selling asset futures is betting on the decrease of the price, but, like margin trading, does not involve dealing with the digital asset directly.

In fact, some futures exchanges allow dealing with profit or loss values in fiat money directly. This is a method increasing in popularity, however it is not as developed a market offering as others. CFD is the ultimate form of betting on an asset without owning it. This is a direct bet on the trend of the currency, settled by the market without the trader having to ever buy, sell or borrow the asset they are betting on.

CFDs are not cryptocurrencies themselves, and function closer to fiat money than to crypto assets. Bitcoin , since a CFD is a measure of price difference of an asset. Unlike all of the options above, direct shorting of an asset requires ownership and actual sale of the coin. The trader will aim to sell high, buy low and work from there with market fluctuations. While this does mean that the trader is in control of all of the assets involved, it requires the initial purchase of an asset.

Most importantly, it involves loss of actual asset if the trade does not work out. The process of direct shorting is somewhat simplified in automated trading, since it allows higher values to be dealt with, but this still constitutes slower profits and a significant risk factor.

In addition to the coin dropping in price, it must also subsequently rebound, otherwise the trader is left with a low price asset and the profit from shorting is cancelled out by the loss of asset value. Betting against an asset can be extremely profitable, especially if the trader predicts a price drop at the end of a long upward trend. Given the volatility of the crypto market, price drops are to be expected, providing many opportunities for shorting. However, being on the losing side of shorting, unless done directly, has no cap on the potential loss one is exposed to.

Since the price of a borrowed asset can increase and the trader is bound by temporal boundaries for the return of the asset, they may find themselves in a situation where they must buy the asset at a higher price than predicted.

Due to the aforementioned volatility of the market, it may be the case that the eventual loss is crippling to the overall portfolio. If a trader does decide to short crypto assets, they must consider a number of factors, the most important of which is money management. For example, it is easy to bet with borrowed assets when doing marginal trading, but the possibility of unexpected and potentially large losses needs to be taken into account. The trader must have boundaries set to ensure that any damage caused by losing out in shorting is covered by the whole portfolio.

Another important consideration is the choice of asset. That makes it potentially unsafe to short multiple coins that you expect to be on the same trend. Most importantly, the trader must be careful in following the market.

Shorting is a popular strategy, so multiple traders will be working to extract profit from a price drop at any time. If the traders using the short strategy opt for buying back, the price surge that will follow can land the slower traders in an extremely unfavorable position.

By using our website, you agree to the use of our cookies. Crypto Trading Strategies. John Stevens , 2 years ago 4 min read Ways to Go Short Margin Trading This involves the trader borrowing an asset in anticipation of a price drop, selling it at a higher price, and then buying back once the price has decreased.

Futures Futures are contracts requiring the trader to buy an asset at a specified price on a certain date. Direct Short Selling Unlike all of the options above, direct shorting of an asset requires ownership and actual sale of the coin.

Risks and Benefits of Going Short Betting against an asset can be extremely profitable, especially if the trader predicts a price drop at the end of a long upward trend. What to do? Start trading. Do you like this artice? Share it on:. Popular posts. Crypto Trading For Beginners. Maxim Roslyakov , 3 years ago 5 min read.

Julia Gerstein , 2 months ago 6 min read. Matt Johnes , 3 years ago 6 min read. Julia Gerstein , 2 months ago 14 min read. Crypto Market Overview. John Stevens , 2 years ago 5 min read. Crypto Market Overview , User Experience.

Julia Gerstein , 2 years ago 9 min read.



How to Short Crypto: The Ultimate Guide

The Decentralized Finance DeFi universe has greatly expanded in recent years and is rapidly developing at an increasing rate. If you are interested to learn more about any of these topics, you should conduct further due diligence and additionally read the project documentation available on the websites provided in parentheses below. One of the main limitations to crypto investing through common platforms like Robinhood www. Some of these new DeFi tools can be found on the Synthetix platform www. Buying Synthetic Bitcoin, for example, provides a long exposure to Bitcoin without actually having to buy Bitcoin on an exchange — while buying Inverse Bitcoin provides a short exposure to Bitcoin where the value of your token increases when the value of Bitcoin declines. You can take similar positive or negative views on Ethereum, Ripple, Cardano, Litecoin, Monero, Dash and several other leading coins and tokens. In this manner, you can take positive or negative views on the market and capitalize accordingly.

What Does Selling Short Mean in Crypto? 2. How Does Shorting Work? 3. 2. How to Sell Bitcoin Short.

The IRS wants to know about your bitcoin and cryptocurrency activity this year

Chingari plans on helping its users to churn GARI tokens for watching or uploading content. Last year, after India had banned short video app TikTok owing to its Chinese roots, a similar indigenous app Chingari gained popularity as its replacement. Dedicated to the Solana blockchain, SolRazr is the first decentralised developer platform ecosystem. Chingari plans to allow its users to utilise the GARI token to create non-fungible tokens NFTs and allow fans to fund their favourite creators. The platform also plans on helping its users to churn GARI tokens for watching or uploading content on the app. The crypto sector is witnessing rapid expansion around the world. More altcoins are launching and coming into circulation every day. Keeping up with the changing market sentiments, many crypto coins are debuting on national, international exchanges. Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks.


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short on cryptocurrency

A relative cryptocurrency veteran at the age of 24, Abhishek Maran has seen the price of his digital tokens rise and fall on sentiment, hype, pump and dump scams and genuine innovation. However, Maran remains largely unfazed. Abhishek Maran believes in cryptocurrencies, but with a background in investing and the benefit of observation, has seen their faults too. Credit: Louise Kennerley. For the crypto community as a whole, Maran sees a silver lining.

Given that much of the market is still down compared to a month ago, there still remains plenty of scope for further gains. As stated above, it has risen strongly in the past week.

Crypto money laundering rises 30%, report finds

Were you left wondering how to keep profiting when cryptocurrency markets entered their recent correction phase? Look no further and learn how various crypto shorting strategies can help you hedge risk while significantly improving profit opportunities. Margin trading is one of the most popular tactics to short cryptocurrencies like Bitcoin and Ethereum. To trade with margin, you borrow the specific crypto as you're placing a trade, then sell it at the current market price. The goal is to re-purchase the asset later at a lower price, which will cover your position and pay back the lender, while also leaving you a profit.


Cryptocurrency tax gap triples

NerdWallet — Professionals have a major piece of advice for those who traded cryptocurrency for the first time last year: Take your tax prep seriously. The IRS has been zooming in on cryptocurrency reporting with increasing interest in recent years. And the last thing you want is to lose money and time reconciling your tax liability, says Douglas Boneparth, a New York City-based certified financial planner. If all you did was purchase cryptocurrency with U. Anytime you sell an asset for a profit, your resulting gain may be subject to capital gains taxation. Gains are then taxed at either the short- or long-term rate, depending on how long you held the asset.

Gains are then taxed at either the short- or long-term rate, depending on how long you held the asset. Short-term gains for assets held less.

Crypto markets under pressure amid growing geopolitical tensions

As bitcoin continues to lose value , cryptocurrency investors, speculators and enthusiasts are now confronting another hurdle -- the official beginning of a potentially nightmarish tax season. The IRS will ask everyone filing a return this year about their cryptocurrency activity, and plenty of people have questions about the tax implications of buying, selling and trading. The IRS treats virtual currencies, like bitcoin and ether -- and even NFTs -- differently from some other assets and investments, and there are specific rules you'll need to follow if you sold or traded those assets last year. Cryptocurrency is treated as property for tax purposes," says Shaun Hunley, a tax consultant at Thomson Reuters.


Washington, D. Health insurers are increasingly selling the coverage — known as short-term, limited-duration plans — following a federal rule change. The plans largely operate outside the scope of state and federal laws that are designed to protect consumers, meaning they typically offer fewer benefits — excluding, for example, coverage for mental health and prescription drugs — and leave patients on the hook for the cost of their treatment. Despite their name, short-term plans are permitted to cover patients for years. We urge lawmakers to listen to voters and protect patients.

The one thing that I have loved about trading in the Forex markets over the years is the ability to go long or short in any pair.

It says police could strike a "huge blow" by targeting key services used to launder cryptocurrency by criminals. Chainalysis says it tracks cryptocurrency wallets controlled by criminals such as ransomware attackers, malware operators, scammers, human traffickers, dark net market operators, and terrorist groups. By following flows of cryptocurrency from addresses associated with criminal activity, Chainalysis was able to estimate the amount "laundered". It says most cryptocurrency is laundered through a limited number of services - for example, particular exchanges favoured by criminals - and shutting these could have a big impact. The report notes that "while billions of dollars' worth of cryptocurrency moves from illicit addresses every year, most of it ends up at a surprisingly small group of services, many of which appear purpose-built for money laundering". It adds: "Law enforcement can strike a huge blow against cryptocurrency-based crime and significantly hamper criminals' ability to access their digital assets by disrupting these services. According to a Europol report, also published on Wednesday, criminal networks specialised in large-scale money laundering "have adopted cryptocurrencies and are offering their services to other criminals".

Professionals have a major piece of advice for those who traded cryptocurrency for the first time last year: Take your tax prep seriously. The IRS has been zooming in on cryptocurrency reporting with increasing interest in recent years. And the last thing you want is to lose money and time reconciling your tax liability, says Douglas Boneparth, a New York City-based certified financial planner. If all you did was purchase cryptocurrency with U.


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