Short selling is a technique of selling a commodity at a high price with the hope of being able to buy it back and return the money when the commodity price drops. Several overseas Bitcoin trading platforms have implemented this short-selling function.

Traders can use short selling as speculation, and investors or portfolio managers can use it as a hedge against the downside risk of long positions in the same or related assets. Speculation carries the possibility of great risk and is an advanced trading method. Hedging is a more common transaction that involves placing an offset position to reduce risk exposure.

In short selling, a position is opened by borrowing a crypto asset such as bitcoin or another asset that the investor believes will decrease in value. The investor then sells these loan assets to a buyer who is willing to pay the market price. Before a borrowed asset has to be returned, traders bet that the price will continue to fall and they can buy it at a lower cost. The risk of loss on a short sale is theoretically unlimited as the price of any asset can rise to infinity.