How To Short Ether (2024)

Short Selling Ethereum

Short selling Ethereum (ETH) involves borrowing ether and immediately selling it, with the plan to buy it back when prices drop. This strategy is used by traders with a bearish outlook on the market to take advantage of declining prices.

A successful short provides a profit of the difference between the sale and repurchase price, less any fees. But it's a strategy that offers the potential for unlimited losses. ETH is a notoriously volatile asset, and losses can mount quickly. To cite an example, on May 21, 2024, the price of ETH spiked 22% in 24 hours on news of a potential ETH exchange-traded fund (ETF), causing over $280 million in losses marketwide on short selling.

Below, we take you through several ways to short the cryptocurrency.

Key Takeways

  • Short selling ether is borrowing ETH, selling it, and repurchasing it after prices drop.
  • Short selling ether generally requires a margin account on a cryptocurrency exchange.
  • Shorting ETH allows traders to potentially profit when the price falls. This can be a way to hedge other crypto holdings or capitalize on bearish market sentiment.
  • While it offers the potential for high rewards, shorting ETH carries the risk of unlimited losses.
  • Traders can use alternative strategies instead of short selling ether, such as buying short ether ETFs.

How Shorting Ethereum Works

Short sellingrefers to when an investor borrows an asset—in this case, ETH—and sells it on the open market, planning to repurchase it later for less. The exchanges that allow you to short ETH often require you to hold a margin account. These accounts allow you to borrow money to buy assets, in this case, ETH. What's borrowed, called "margin," is often used to augment your buying power and potentially amplify your gains.

In May 2024, the Securities and Exchange Commission gave NYSE Arca, Nasdaq, and Cboe BZX the approval to list Ether Spot ETFs. These instruments are similar to the Bitcoin Spot ETFs approved earlier in the year.
Similar to shorting a regular ETF, once the SEC approves an ETH ETF, you can borrow shares from the broker, sell them immediately, buy them back when prices fall, and then return the shares.

Suppose you think ETH is due to drop in price soon, and you have $10,000 in your margin account, which allows you to trade up to twice what you have in the account. The price of ETH on crypto exchanges is about $4,000. Here are the steps:

  1. Borrow on margin: You decide to use the maximum leverage allowed and borrow an additional $10,000 from your broker, giving you $20,000 to trade.
  2. Shorting ETH: You use the entire $20,000 to short sell five ETH. This means you're selling five ETH you've borrowed from the broker, expecting to buy them back later at a lower price.
  3. Price drop: As you predicted, the price of ETH plummets to $3,000.
  4. Close the position: You buy back five ETH at the new, lower price of $3,000, spending a total of $15,000.
  5. Profit time: You return the five borrowed ETH to the broker and walk away with a $5,000 profit (minus any fees or interest).

Using ETH Futures ETFs

Ether futures ETFs began trading in October 2023. If you have a margin account that allows short selling, you can sell short one or more of these Ether ETFs to profit from falling ETH prices.

If you don't have the desire to sell ETH futures ETF shares short, another option is to purchase a short cryptocurrency ETF, like the Proshares Short Ether Strategy ETF (SETH). This ETF attempts to return the inverse of the Bloomberg Galaxy Ethereum Index.

ETH Futures ETFs
NameTickerExpense RatioAssets Under Management (Q3 2024) $MillionsLaunch Date
Long ETH ETFs
VanEck Ethereum Strategy ETFEFUT0.66%$33.23October 2023
Bitwise Ethereum Strategy ETFAETH0.85%$14.67September 2023
Bitwise Bitcoin and Ether Equal Weight Strategy ETF (*also holds BTC futures)BTOP0.85%$10.46September 2023
ProShares Ether Strategy ETFEETH0.95%$88.20October 2023
ProShares Bitcoin & Ether Equal Weight Strategy ETF (*also holds BTC futures)BETE0.95%$6.48October 2023
ProShares Bitcoin & Ether Market Cap Weight Strategy ETF (*also holds BTC futures)BETH0.95%$8.23October 2023
Purpose Ether ETFETHH.TO1.00%$472 (CAD)April 2021
CI Galaxy Ethereum ETFETHX-U.TO0.40%$651.94 (CAD)April 2021
Inverse ETH ETFs
ProShares Short Ether Strategy ETFSETH0.95%$4.46November, 2023
21Shares Short Ethereum ETPSHETH2.50%$256.65September, 2022

Margin Trading

One of the most accessible ways to short Ethereum (ETH) is through a cryptocurrency margin trading platform. Many exchanges, including brokers that trade shares of inverse ETH ETFs, facilitate this type of trading, allowing traders to borrow funds to boost their position. This leverage can significantly boost potential gains. The caveat is that potential losses are magnified as well.

It's crucial to remember that margin trading, like any leveraged trading strategy, requires careful risk management and a thorough understanding of the market. Always research any exchange or brokerage you plan to use and never invest more than you can afford to lose.

Can I Short Sell Crypto?

Many exchanges let you short cryptocurrency. If you believe that ether or another cryptocurrency is overpriced or may go down, you might go short to capitalize on that. If the price of your chosen crypto rises, you will instead record losses.

Can You Short Crypto in the United States?

Yes, you can short crypto in the U.S. Cryptocurrency exchanges like Coinbase let you short crypto with a margin account. You can also short crypto ETFs on exchanges.

Can You Short Crypto Without Leverage?

You can short cryptocurrency without leverage, but your returns won't be a high as they would be if you used leverage.

The Bottom Line

Shorting ether is a strategy of borrowing, selling, and repurchasing the cryptocurrency when the price drops. There are several ways to short ether. First, one can use one of the crypto exchanges that allow shorting ETH. You can also borrow shares of an ETH futures ETF to wager against its price going up. There are also inverse ETH ETFs that use margin trading strategies to return the opposite of ETH's price moves in the market.

Short-selling any asset is risky, but short-selling a volatile one like ETH amplifies those risks further. Only those who know the market well and can afford to lose the value of their trades should consider engaging in this strategy. There could be an upside, but the downside of short-selling ETH is unlimited.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimerfor more info. As of the date this article was written, the author does not own ETH.

Do you have a news tip for Investopedia reporters? Please email us at

tips@investopedia.com

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy.

  1. CoinGlass. "Liquidation Heatmap."

  2. TradingView. "ETHUSD."

  3. Financial Industry Regulatory Authority. "Short Interest – What It Is, What It Is Not."

  4. Securities and Exchange Commission. "Release No. 34-100224."

  5. Financial Industry Regulatory Authority. "Brokerage Accounts: Margin Accounts."

  6. Proshares. "Short Ether Strategy ETF (SETH)."

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How To Short Ether (2024)

FAQs

How To Short Ether? ›

This strategy is also known as shorting Ethereum, or taking up a short Ethereum position. The way to do this is to use a margin trading account to borrow ETH tokens to sell upfront. Subsequently, if the price of ETH falls as you have predicted, you can buy the tokens back at a lower price and earn a profit.

Is it possible to short Ethereum? ›

One of the most accessible ways to short Ethereum (ETH) is through a cryptocurrency margin trading platform. Many exchanges, including brokers that trade shares of inverse ETH ETFs, facilitate this type of trading, allowing traders to borrow funds to boost their position.

Is there an inverse Ethereum ETF? ›

On Friday, ProShares rolled out two ETFs offering 2x leveraged and 2x inverse exposure to the performance of ether, respectively. The ProShares Ultra Ether ETF (NYSE Arca: ETHT) and ProShares UltraShort Ether ETF (ETHD).

How to short ETH on Coinbase? ›

Placing a Short Position: After enabling margin trading, you can place a short position on a specific cryptocurrency. You select the trading pair, such as BTC/USD or ETH/BTC, and choose the “Sell” option.

What is the fastest way to buy ether? ›

You can buy Ethereum instantly in the BitPay app or through the BitPay website online. Select the amount you want to convert to Ethereum.

Is it legal to short crypto? ›

Yes. Crypto shorting most commonly happens by using “margin,” — which essentially means borrowing crypto. You then sell the crypto you have borrowed with the idea that you can pay the margin back by rebuying the crypto at a future time when the price will be lower (hence “shorting”).

How to make money shorting crypto? ›

To short Bitcoin via margin trading on the Crypto.com Exchange, for example, involves the following steps:
  1. Sign up for the Crypto.com Exchange.
  2. Open a margin trading account, if eligible.
  3. Conduct thorough research on the market and Bitcoin.
  4. Place a short sell order for Bitcoin.
  5. Set stop-loss and take-profit levels.

What apps can you short crypto? ›

You can short Bitcoin futures at the Chicago Mercantile Exchange (CME), the world's biggest derivatives trading platform, and on cryptocurrency exchanges. Bitcoin futures can be purchased or traded on popular exchanges like Kraken or BitMEX and can also be found at popular brokerages such as eToro and TD Ameritrade.

Does Coinbase let you short? ›

Coinbase also offers options to short Bitcoin via futures. However, as of April 2024, Coinbase no longer offers margin trading.

Can I Unstake ETH on Coinbase? ›

Unstaking ETH using Coinbase Wallet

Navigate to the DeFi tab or the Ethereum asset detail page. Select the Unstake button. Enter the amount you want to unstake, and confirm the transaction.

Can I make money with ether? ›

The current estimated reward rate of Ethereum is 2.57%. This means that, on average, stakers of Ethereum are earning about 2.57% if they hold an asset for 365 days. 24 hours ago the reward rate for Ethereum was 2.70%. 30 days ago, the reward rate for Ethereum was 2.49%.

Is ether faster than Bitcoin? ›

Ethereum's energy consumption also substantially decreased after The Merge, and the network now processes many more transactions than Bitcoin. The Ethereum network processed about 1,000,000 transactions per day by the end of August 2023, while Bitcoin's network processed 550,000 over that entire month.

How to sell Ethereum instantly? ›

How to sell Ethereum
  1. Create your free Kraken account. Verify your details to get started.
  2. Send ETH to your Kraken account. Deposit ETH in your secure Kraken account.
  3. Sell Ethereum instantly. Enjoy ultra-fast ETH transactions & withdraws.

What's the lowest Ethereum has ever been? ›

Ethereum Price Overview

The market rank of Ethereum is 2 based on a market capitalization of 385364986317.00 €. Ethereum has a circulating supply of 122276991.71 ETH. The highest recorded Ethereum price is 4228.93 €. And the lowest recorded ETH price is 0.381455000 €.

What is Ethereum short? ›

Ethereum is a decentralized blockchain platform that establishes a peer-to-peer network that securely executes and verifies application code, called smart contracts. Smart contracts allow participants to transact with each other without a trusted central authority.

How high can Ethereum hit? ›

ETH can realistically hit $10,000 in the coming years, either in 2025 or in 2026. Our current 2024 ETH prediction suggests that ETH will find resistance at $5515.71 in 2024. We are confident that our most bullish ETH target of $10,000 will be hit in the coming 3 years.

Can Ethereum reach $5,000? ›

While the current market conditions favor Ethereum, reaching $5,000 depends on several factors, including: Overall market trends: Continued strength in the broader cryptocurrency market would benefit Ethereum. Regulatory developments: Approval of an Ethereum ETF could trigger a significant price increase.

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