How to bet against bitcoin by shorting

If you think that the price of bitcoin is going to go up, buying and holding on to some can be profitable. But what if you believe it will go down instead, how can you profit from that movement? 

The key is borrowing. If you believe that bitcoins are going down, you could borrow 100 bitcoins from someone and then immediately convert them to US dollars. When the time comes to pay back the borrowed coins, you buy another 100 bitcoins from the open market and give those back instead. If the price of bitcoin went down in the meantime, you just made money by shorting.

If you are wrong, your loss is unlimited, as even if one bitcoin becomes worth millions of dollars, you still have to pay them back.

As an example of shorting, suppose the price of one bitcoin is $100. You borrow 100, then immediately sell them and get $10000. You wait a week and the price of one bitcoin goes down to $60. When it is time to give those 100 back, you can buy them for $6000 and make a $4000 profit.

But as it is unlikely that you have personal friends that would let you hold their bitcoin, how can you borrow them? Enter Bitfinex. Bitfinex is a marketplace with several features, one of which is lending and borrowing bitcoin. You can browse lending offers, for example as I write this you could get a loan for 15 days for a 7% yearly interest. After getting the loan you can use it for trading.

For Bitfinex, your loss is not quite unlimited, as if after shorting the price goes up too high, you will be required to automatically close your position. Good luck!