Even a fool can make profits in a bull market. It may sound somewhat crude, but that’s generally the consensus in the trading community worldwide. And it applies pretty much the same to the crypto market as well, perhaps more so considering the high volatility of the asset class.
In contrast, a bear market can be understandably very alarming for investors and traders. However, that doesn’t mean that you can’t profit off it. In fact, as they say, bear markets are where serious traders accumulate knowledge and experience to prepare the foundation for future profits.
But to make that happen, you’ll need the trading skills and foresight to tap in on crypto’s volatility during bumpy rides. Alongside, you will also need a reliable trading platform that supports both long and short positions.
That is where a platform like PrimeXBT can make a difference. For those unfamiliar with it, PrimeXBT promises to bring you a safe and reliable way to improve your profitability from crypto trading by using leverage (margin) on both long and short positions.
Market is dumping, but you can still make profit
As you probably remember, Bitcoin started the year 2021 with a bang and by mid-April, it had reached an all-time high valuation of $64,000+. Most major altcoins followed suit, making the market decisively bullish.
Things have slowed down since, though, with the BTC/USD pair now down nearly 50% since the ATH in April. As of July 2021, Bitcoin seems stuck between $30,000 and $35,000 and not much is happening with most major altcoins either.
Does that mean you should sit idle twiddling your thumb doing nothing? Surely not!
That’s because, when the market is dumping or moving sideways, a long or short position with leverage can help you maximize your profits.
In crypto, a long position is when you purchase and own an asset such as a coin or a token. Meanwhile, a short position means you owe an asset to someone but haven’t actually purchased it yet. Or, in other words, shorting an asset implies that you are selling an asset that you do not currently own. Somewhat counter-intuitive, right? Well, let’s dig a little deeper for perspective.
Long and short positions explained
As a trader, you should ideally opt for a long position when you are bullish on an asset. For example, if you are anticipating the Bitcoin price to go up significantly over the next few weeks, it makes sense to accumulate more BTC in your portfolio in the hope that your profits will also increase substantially as the price goes up. You wouldn’t want to go long on an asset that you think is about to shed value by the same logic.
Shorting, meanwhile, is just the opposite of that. You short an asset only when you want to make a financial gain off of a drop in its value. Basically, an investor or a trader going for a short position believes that the price of the asset is likely to fall and therefore, hopes to purchase it at the lower price and make a profit afterward.
Example of a short position
For example, let’s assume a scenario wherein you are convinced that the price of Ether (ETH) will fall in the coming days. So you decide to sell 10 ETH right away before the price starts dipping. But the issue is that you actually own only 1 ETH – so what do you do now?
The answer is you go to a trading platform such as PrimeXBT to borrow 9 ETH on the condition that you will pay it back at the time of the final settlement. So, you borrow and sell 10 ETH at $2,500 each to make $25,000.
Now, if your prediction was correct and the ETH price falls to $2,000 at the time of the settlement a week later, you are essentially paying back 9 ETH at $2,000 each. That’s $18,000 in total. So, you have made a net profit of ($25,000 – $18,000 =) $7,000 by shorting ETH at $2,000.
That right there is a rough example of a well-executed short sale. If you need more information on shorting cryptos, BeInCrypto has a detailed guide on just that.
We have deliberately avoided mentioning the concept of margin trading in the example above to keep things simpler. Margin trading is the practice of borrowing money (or an asset) from an exchange or broker to set your position.
In the hypothetical example above, you borrowed 9 ETH from PrimeXBT, which is precisely what margin trading is about. It allows you to trade with more funds than you normally would. And that can be really useful to exponentially increase your profit margins in a bear market or even when the market is acting relatively quiet without significant price fluctuations.
For perspective, without the borrowed funds in the example above, your profit would be only (1 x $500 =) $500 instead of $7,000.
However, because you are investing borrowed funds, margin trading can also be a double-edged sword. To execute a short position using borrowed funds, you need to fund your account with collateral. And just in case something goes wrong and the market behaves unexpectedly, you risk losing both your own funds, as well as the borrowed fund. You will also require paying interest on the borrowed fund.
That is why you should be extremely careful while getting your feet wet in the extremely rewarding but equally risky realm of margin trading.
And if you have already made up your mind to try it first-hand, we suggest that you pick a trusted platform with a good track record and a decent collection of educational material for beginners. In our early assessment, PrimeXBT fits the bill on all fronts. But as always, make sure to do your own research and understand the risks of margin trading before signing up.
PrimeXBT offers a sizable collection of free learning material, competitive fees, and a wide range of financial instruments to trade.
PrimeXBT is a blockchain-powered trading services provider operating from the Republic of Seychelles. It is currently offering services to users from more than 150 countries across the world.
PrimeXBT offers dedicated trading platforms for cryptocurrencies, forex, stocks, precious metals, and commodities. Specifically, it offers leveraged trading on 20 fiat currency pairs, 5 crypto assets, 3 commodities, and 7 indices.
The maximum leverage applicable to cryptocurrencies is 1:100, while that for other asset classes is 1:1000.
As of July 2021, the platform supports four cryptocurrencies including Bitcoin, Ethereum, Litecoin, and EOS. Spreads are generally tight and the fee structure is transparent and on the slightly lower side — relatively speaking.
In terms of security, PrimeXBT claims to have high-level security features including protection from DDOS attacks, 2FA, offline cold storage where the bulk of the user funds are stored as a safeguard against online breaches, and Bitcoin wallet whitelisting, to name a few.
As for risk management, PrimeXBT is one of the few platforms in crypto trading that allows the implementation of stop loss and take profit orders simultaneously.
The user interface is relatively simple even for newbies, although it can be subject to the tastes and preferences of individual users. The customizable interface comes loaded with tools for technical analysis and charts.
You can refer to BeInCrypto’s latest PrimeXBT review for a more detailed overview of the platform.
Alternatively, you can sign up on PrimeXBT to get a first-hand account of the platform. You can also get a 50% capital trading bonus on your first Bitcoin deposit by using the promo code: Bein50.
The registration process is simple and only requires a minute or less to be over with.