How to Short Ethereum

In recent weeks, the value of Ethereum’s internal cryptocurrency, Ether (ETH), has fallen by more than 25% from $11 to around $7.50. At the same time, rival digital currency Bitcoin (BTC) has gained 6.5%. Some are guessing that a series of flaws and setbacks in Ethereum code and security breaches have finally undermined its value and see prices falling even further. For those looking to profit from potential ETH price decreases, here is how to short it…

For investors seeking to take advantage of a falling market, short selling is an option where you can borrow assets that you don’t already own from somebody who does, then sell it in the market with the hope of buying it back at a lower price. Online cryptocurrency exchanges offer margin facilities to enable this type of borrowing. Some exchanges lend directly using their existing stock of cryptocurrency while others utilize peer-to-peer credit arrangements from other users. For example, Poloniex and Kraken offer P2P lending options while BTC-e offers direct margin lending.

If a trader believes that ETH will decrease in value when pitted against Bitcoin, they can buy Bitcoin and then trade it for Ethereum once the former has lost some value. While this won’t always result in a profit, it’s more likely to happen than if the trader had simply exchanged Ethereum for another cryptocurrency.

Recently, Ethereum’s cryptocurrency, Ether, has lost more than 25% of its value and some believe that the negative trend will continue. For those looking to make money from a falling price, online exchanges offer short selling using margin. Alternatively, traders can take the opposing position in ETH/another digital currency pairs.