Coinbase Review - Expert review of Bitcoin/cryptocurrency exchange, Coinbase. Read our analysis including how to start trading in 3 steps. One of the easiest ways to short bitcoin is through a cryptocurrency margin trading platform. Many exchanges as well as brokerages allow this type of trading, with margin trades allowing for investors to "borrow" money from a broker in order to make a trade. It's essentially a short-term loan. By buying or selling on margin, traders can increase their leverage and buying power, potentially generating.
How to short bitcoin on coinbase - opinion
What: How to short bitcoin on coinbase
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Coinbase has added margin trading to its bitcoin exchange
GDAX, the cryptocurrency exchange run by Coinbase, has added margin trading to the platform.
Eligible traders can now trade up to 3X leveraged orders on Bitcoin, Ethereum and Litecoin order books.
If youre unfamiliar with trading and exchanges, margin trading is when you borrow money from your broker to buy or sell more stock than you can afford. Its essentially a short-term loan. By buying or selling on margin, traders can increase their leverage and buying power, potentially generating profits beyond what their own cash balance would have supported.
This feature is mainly geared toward institutional investors. Thats because Coinbase has launched the feature attempting to fit within the boundaries of the Commodity Exchange Act.
This means that traders have to certify that they meet one of the qualifications to be allowed to trade on margin. While the full list is here, the requirements include things like being a corporation with a net worth exceeding $1,, and trading on margin in order to hedge risks associated with your business. Individuals need to have a minimum of $5,, invested on a discretionary basis in order to be allowed to trade on margin.
By deciding to build their product within the guidelines of the Commodity Exchange Act, Coinbase has at least initially excluded a large segment of their user base. Other exchanges, like brightshub.com, offers margin trading to all users but probably wouldnt stand up to U.S. regulators.
For Coinbase, moving slowly and maintaining a favorable relationship with regulators is necessary if the company wants to stick around. The company explained: were committed to working with regulators as the blockchain space continues to develop, rather than take on unnecessary risk just to get features out more quickly. Some other digital currency exchanges have decided not to do this. For us, the best approach was to carefully design our margin trading feature and engage with the CFTC to make sure that GDAX remains compliant.
Additionally, the exchange isnt currently charging interest or fees to access Margin Trading because they believe that consumer lending laws require specific licenses to do this.
This move should also please Wall Street investors who were waiting on the recently denied Bitcoin ETF application. With the combination of margin support plus the strict regulatory focus, Coinbase and GDAX could be an ETF alternative for investors wanting to safely purchase bitcoin now.