Topic focus: 5 ways to short bitcoin

Read the article and answer these questions.

1. What do investors think about bitcoin?

2. What is the easiest way to short bitcoin? How does it work?

3. What is the procedure for bitcoin at Futures Market?

4. What is the procedure of shorting bitcoin at binary options trading?

5. What is the connection between predictions and bitcoin market?

 

While bitcoin and other cryptocurrencies have made astronomical gains so far this year, up more than 1,400% in 2017, that hasn't stopped many investors from remaining skeptical about the long-term strength of the industry. In fact, as prices climbed higher and higher, crossing big price milestones very quickly, some analysts predicted that a bubble pop is approaching. For those investors who believe that bitcoin is likely to crash at some point in the future, shorting the currency might be a good option.   

Margin Trading

One of the easiest ways to short bitcoin is through a cryptocurrency margin trading platform. Many exchanges 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 important to remember that there may be a leverage factor, which could either increase your profits or your losses. 

Futures Market

Bitcoin, like other assets, has a futures market. In a futures trade, a buyer agrees to purchase a security with a contract which specifies when and at what price the security will be sold. If you buy a futures contract, you're likely to feel that the price of the security will rise; this ensures that you can get a good deal on the security later on. However, if you sell a futures contract, it suggests a bearish mindset and a prediction that bitcoin will decline in price. According to the Merkle, "selling futures contracts is an excellent way to short bitcoin." Futures markets are somewhat more difficult to find, but OrderBook.net has been known as a place to buy and sell bitcoin futures.

Binary Options Trading

Call and put options also allow people to short bitcoin. If you wish to short the currency, you would execute a put order, probably with an escrow service. This means that you would be aiming to be able to sell the currency at today's price, even if the price drops later on. Binary options are available through a number of offshore exchanges, but the costs (and risks) are high.

Prediction Markets

Prediction markets are another way to consider shorting bitcoin. They have not been around in the cryptocurrency world for long, but they can nonetheless be an asset for shorting currencies like bitcoin. These markets allow for investors to create an event make a wager based on the outcome. You could, therefore, predict that bitcoin would decline by a certain margin or percentage, and if anyone takes you up on the bet, you'd stand to profit if it comes to pass. Predictions is one example of a prediction market for bitcoin.

 

By Nathan Reiff Updated January 8, 2018

INVESTOPEDIA

https://www.investopedia.com/news/short-bitcoin/?utm_source=personalized&utm_campaign=www.investopedia.com&utm_term=12160023&utm_medium=email

 

CASE STUDY

One of the Three Certain Things in Life:

Taxes, Taxes, and More Taxes

Scenario 1

Bill Gold is employed part-time in the garden shop of a major retail chain, located in a rapidly-growing city. He works about 20 hours a week at the garden shop. The rest of the time he runs his own lawn-care service. Bill does all the work himself, and because of his fine work he has many loyal customers. At least 60 percent of Bill’s customers pay cash for his services; the rest pay by check.

    Bill does not believe that the federal government’s tax system is fair to the working man and women. He feels that the system favors the wealthy and puts the greatest burden on the middle-class taxpayers. Therefore, Bill feels that the less tax he pays, the more fair the system is for him. He has decided to report as taxable income only the payments he receives in the form of checks. He will not report any cash payments as income.

 

    Items for Consideration

1. Would you classify Bill as an ambitious entrepreneur? Why or why not?

2. What do you think Bill is tempted to do in this situation?

3. The federal tax in the United States is a progressive tax. What is a progressive tax?

4. Should individuals like Bill take it upon themselves to make the tax system more fair from their viewpoint? Why or why not?

5. How is rationalization involved in this case?

6. Will the government have any record of Bill’s cash earnings?

7. How should a self-employed person pay taxes during the year?