What is Short?
Crypto Glossary Definition
A method of betting on an asset decreasing in value. When someone shorts an asset, the investor borrows that asset and immediately sell it, hoping to buy it back when it is cheaper.
Why Short Matters
Going "short" means borrowing and selling an asset with the intent to buy it back later at a lower price, profiting from a decline — it's a bet against the asset, and losses on a short are theoretically unlimited since there's no cap on how high a price can rise.
Short in Practice
A trader convinced that a recently overhyped altcoin is due for a sharp correction opens a short position on a derivatives exchange, effectively borrowing units of the coin from the platform and immediately selling them at the current market price. Over the following week, negative news about the project spreads and the price drops significantly, at which point the trader buys back the same number of coins at the lower price, returns the borrowed units to the exchange, and pockets the difference as profit, minus any borrowing fees charged along the way. Had the trade gone the other direction instead — say, the coin instead rallied on unexpected good news — the trader would have been forced to buy back at a much higher price than they sold at, and because there's theoretically no ceiling on how high an asset's price can rise, the potential loss on a short position is unbounded in a way a simple long position never is. This asymmetric risk is why exchanges typically require additional collateral, called margin, to open a short, and why sharp upward price moves can trigger a wave of forced short liquidations known as a short squeeze.
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