TL;DR- Want to short Bitcoin? KuCoin offers shorts on sixty or so coins. If you strongly believe that the price of crypto will go down, you could make a short trade on KuCoin and make some cash. Be careful, though: the more leverage you use, the more likely you will get wiped out.
If you haven’t already, I heavily recommend getting a hardware wallet like a Ledger Nano to hold your crypto and NFTs! A little bit of spending on security goes a long way in the jungle of a space that crypto is.
If you’re a fellow crypto maniac, KuCoin can be a godsend. KuCoin has low deposit fees, low withdrawal fees, margin trading, and loads of trading features in addition to spot trading.
Can you short on KuCoin?
Yes, you can absolutely short cryptocurrencies on KuCoin, with leverage up to 5x without Know-Your-Customer (KYC) and up to 20x with KYC. Leverage multiples used to be much greater than this, but leverage has a nasty habit of causing market crashes.
There’s a theory with solid evidence that the May 2021 crypto crash was the doing of over-leveraged accounts. Yes, the China FUD was palpable- but the market reaction was outsized.
Due to all this market carnage, most of the crypto exchanges have thus been reigning in how much leverage is available. Exchanges are also doing this because they know that extremely leveraged positions tend to piss off various regulatory bodies in different countries.
What is short selling?
Let’s say you and your friend Kevin Costner are arguing whether the price of the Facebook stock is too high. It’s currently sitting at $2,300/share. Keven Costner thinks it’s fairly valued at $2,300- you believe the stock is worth way less. You accept this for a lot of reasons. The government will break up Facebook, and Apple/Google will limit Facebook’s intrusive ads, and the company’s cash flows are shrinking.
You decide to act on your beliefs. Kevin Costner lets you “borrow” 20 shares of Facebook stock. You turn around and sell the 20 shares at the market price of $2,300/share. A week later, Facebook’s share price has indeed fallen to $1,500/share. You repurchase 20 shares at this price and return them to Kevin Costner, who let you borrow them. Since your initial sale was (20*$2,300 = $46,000) and you bought the shares back at (20*$1,500= $30,000) you cleaned up with a ($46,000-$30,000= $16,000) profit on the trade. It pays to be right! All you need to know to become a billionaire is to be able to predict the future perfectly. Now pretend that Kevin Costner is KuCoin, and Facebook stock is Shiba Inu coin. Or whatever coin you think is going down.
Leverage- will I owe money if I use leverage and lose on my trade?
No, you won’t owe money. KuCoin exchange will automatically liquidate your position and take your money before this happens. When you place a short trade, KuCoin will show you the approximate price the coin has to make it to for you to be liquidated. This price is the liquidation price, a must-know term for those who are margin trading.
It doesn’t mean leverage can’t wreck you, though. If you leverage heavily on a short, the crypto will only need to move up a small amount for you to lose everything you put in. Because of this, I wouldn’t recommend using the leverage feature when doing your first dozen or so short trades with KuCoin. If you lose 50%, 75%, or even 90% of your trade, you can always come back from it. If you get wiped out, you’re out of luck!
Trading vs. Gambling
I’ll let you in on a secret- most people who do “day trading” are just gambling. It stops being about educated guesses and analyses and starts being all about those dopamine hits. Let’s face it- it feels great when a coin we own has an epic pump. It’s why we’re all in crypto.
Gambling a little is fine, but you should be honest about what you’re doing. If you’re ok losing what you’re trading, and most of your serious savings are somewhere else, that’s fine. It can be an excellent way to learn the options game and improve it.
Don’t lose money
A crazy high percentage of day traders lose money- around 90%. My preferred strategy for investing has always been to buy and hold.
As Warren Buffett and Charlie Munger once said in a letter to shareholders- “our favorite holding period is forever.” If I’m shorting cryptos on KuCoin, it’s only with small fractions (1%-2%) of my portfolio. I’ve got a kung-fu death grip on my other coins.
Steps to short cryptos on KuCoin
Let’s get down to business on the KuCoin exchange. Today, I’ll show you how to short any crypto using KuCoin Futures.
Make sure your account is funded
1. You’ll need to be set up with KuCoin and have your KuCoin account funded.
Fund your futures account
2. The next step will be to fund your KuCoin Futures account. Go to the Assets Overview homepage after logging in to your KuCoin account. In the middle left of the page, under the Futures Account square, choose Transfer. Fund your futures account using any of your other accounts.
3. On the top bar of the KuCoin homepage, select the derivatives drop-down and select Futures Pro.
Find the cryptocurrency you’re shorting
4. Across the top of the Futures Pro homepage, you’ll see the trading pairs. There are currently 60 or so pairs from which to choose. Select the crypto you’d like to short.
5. On the right side of the trading window, enter the number of coins you’d like to short underneath Amount. Underneath Price, enter the price you’d like to buy the cryptocurrency.
I usually go for whatever the price of the coin is immediately at that moment. I want my futures trading trades to execute immediately. After entering this amount, you should see the trade cost underneath the red ‘sell/short’ button on the bottom right. Thankfully, KuCoin has low fees.
Get levered up (not recommended)
6. If you’d like to use leverage on your trade and risk getting wiped out quicker for a potentially more significant reward, use the sliding scale to click what multiple you’d like to use.
Pull the trigger
7. Click Sell/Short, and when the pop-up window comes into view, select Sell. Input your trading password if prompted. You’ve just set up your first short on KuCoin. Congrats! All you need to do is sit there and hope the crypto gods smile on you.
Always do stop loss & take profit.
Set a stop-loss
It’s important to set boundaries on your trade and stop losses and profit at specific price points. For example, if the crypto you’re shorting is at $100, you could set a stop loss at $105, so you won’t lose more money after the initial 5% loss. KuCoin will automatically close your trade once the price reaches $105.
Set a take-profit
Likewise, if you short a $100 crypto and the price goes down to $95, you can set an automatic profit-take where KuCoin will close your position when the price hits $95. Click the clipboard and pen icon on the right side of the trade info.
Enter either the prices you’d like to set a stop loss and profit-take or click the percentage gains or losses you can tolerate. Select the market price to put these at market prices.
How do you close a position on KuCoin futures?
To exit your position, click the empty square with the pen hovering over it on the bottom right of the screen next to your trade info. Select a profit take or stop loss below or above where you currently are. Select limit and hit Confirm.
Other ins & outs on KuCoin
When it’s time to close your position on KuCoin, you’ll pay trading fees in the neighborhood of 0.0125% to 0.1%. These trading fees are far better than the trading fees charged by competitors like Coinbase or Kraken.
If you’re funding your KuCoin account with Bitcoin or any other cryptocurrency, KuCoin does not charge deposit fees.
Withdrawal fees on Kucoin are similar to the trading fees. Withdrawal fees on KuCoin are set at a nominal 0.1%, with lower fees if you hold the KCS token.
KuCoin also includes an automated bot to perform trades. It’s possible to choose between the classic method of selling high and buying low, or doing DCA or dollar-cost averaging.
Set up two-factor authentication (2FA)
It’s good security practice to set up two-factor authentication with all of your crypto exchange accounts. Unfortunately, the crypto space is still wrought with fraud and theft. Protect yourself whenever you buy crypto.
A final word
I have found options trading (longs and shorts, especially with leverage) to make me entirely mentally preoccupied. I’m usually checking my phone every 2-3 minutes and unable to sleep, which I don’t like.
In February of 2021, I traded options the entire month and lost sleep, and was far less productive at work. In addition to losing time and mental energy, I lost money. I prefer to rest easy with my investments.
This is why my portfolio contains a majority of large caps like Bitcoin, Ethereum, and Cardano, with no options. Shorts and longs, especially with leverage [margin trading], are playing with fire. You’ve been warned!