The Bitcoin is one of the most volatile investments you can find. Therefore, a crash in the price of the digital currency happens quite regularly. However, this is not a reason for panic! It is precisely when the price of the Bitcoin crashes that you can benefit. In this article we examine two ways to make money from a falling bitcoin price.
Possibility 1: Make money by going short
Many of today’s brokers offer the possibility to go short and make money from falling prices. For example, you can go short on Bitcoin or Ethereum. When you go short, every drop in price increases your profits. This is of course very interesting, especially when considering that a cryptocurrency like the Bitcoin sometimes drops 40 percent in a day.
But how can you go short on the Bitcoin? The best broker to do so is Plus500. With this broker you can benefit from a Bitcoin crash in the following ways:
- Take advantage of rising and falling prices of each crypto currency.
- Apply leverage to magnify your results.
- Trade with an unlimited demo account to try it risk-free.
When cryptocurrencies have dropped dozens of percent, it is not uncommon for traders and investors to regard this as suitable new buying opportunity. When enough people get in again, the downward spiral is stopped and then the buyers take over from the sellers. The upward movement causes more and more buyers to enter and before you know it the old price has already been surpassed.
Indeed, you can make a lot of money investing in cryptocurrencies like the Bitcoin, IOTA, Ripple, even after a crash. You should however manage to hold the crypto currencies for a while, instead of selling them too quickly. You can also purchase cryptocurrencies at Plus500.
Timing is important
Timing is essential when deciding whether to buy or sell. You should use some background information that supports your decision. Examine the reasons behind the crash. A crash often occurs as a result of a bad news report or, in the case of cryptocurrencies, a big hack. When determining the cause of the crash, try to determine its impact on the demand for cryptocurrencies. This allows you to determine whether the falling price is mainly caused by panic or that there is a fundamental reason behind it.
Most crashes in Bitcoin arise from panic. This is not surprising considering that most people who speculate on the Bitcoin have little or no knowledge of the digital currency. When the price starts to fall, many people sell the coin immediately. This can explain the heavy and sudden price changes of the Bitcoin. If this is indeed the case, you could assume the price to pick up again.
However, if there is a good reason behind the sharp decline, it is probably not a good time to start buying. It is very probable that the Bitcoin will crash even further, and it would be a big shame if that was the moment you purchased Bitcoins. Anyhow, the volatility of the Bitcoin price makes it an attractive trading instrument for the short term.