Understanding Short Selling in the Cryptocurrency Market
Introduction
What is Short Selling?
Short selling, commonly known as shorting, is a trading strategy in which traders borrow a cryptocurrency and immediately sell it at the prevailing market price. The primary objective of shorting is to profit from an anticipated decline in the value of the borrowed asset.
Shorting in Cryptocurrency Trading
Shorting is possible in the cryptocurrency market through specific trading mechanisms like margin or futures trades. These platforms allow traders to enter into contracts to sell cryptocurrencies they do not own, speculating on their future price decline.
The Notion of "Shorting"
The term "shorting" originated from the traditional financial markets. When a trader sells an asset they do not own, it is referred to as "selling short" because they are essentially borrowing the asset for a temporary period.
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