How to Short Crypto on Binance - A Complete Guide for 2023

Wondering how do you short on Binance? This article will give you all the possible methods and step-by-step guides for each of them. After reading, you will be able to make a profit from the downtrend and always be safe in the bear market.

What are the Different Ways to Short Crypto on Binance?

There 3 primary ways how to short on Binance: 

• Margin trading
• Futures trading
• Leveraged tokens

Margin trading is a method of borrowing assets to enlarge your position or short an asset. This strategy allows you to trade with leverage, which means you can boost your gains. Additionally, it brings the opportunity to profit from the downturns. 

Futures trading is a method of trading derivative contracts. It obligates to sell or buy a particular amount of an asset at a predetermined price and date. It allows you to deal with more leverage and to take long and short positions. However, it brings more risks to your portfolio. 

Leveraged tokens are a type of futures contract represented in spot tokens. It allows you to take an enlarged position without the risk of liquidation and the need to manage margin requirements by yourself. Binance leveraged tokens are designed to track the cost of an underlying asset, such as Bitcoin or Ethereum, with automatically adjusted leverage built in.

Comparing Margin, Futures, and Leveraged Tokens

Method	Features	Advantages	Disadvantages
Margin Trading	Borrow funds to trade bigger positions	Increased profits if the market moves in your favor	Increased losses if the market moves against you
Futures Trading	Trade contracts that represent a specific amount of an asset at specific requirements in the future	Increased profits if the market moves in your favor	Increased losses if the market moves against you
Leveraged Tokens	Designed to provide leveraged exposure to the underlying asset	Can be held for a short period of time	Not intended for long-term investment

How to Short Sell on Binance Margin Trading?

The exchange offers you two types of trading - Cross and Isolated.

Cross margin can use all available funds from the wallet, giving access to all available trading pairs at once. You can trade any crypto from one cross margin account. But the liquidation risk from one trade can affect all the funds from the cross margin wallet. 

An isolated margin has an independent wallet for each trading pair. To short Bitcoin to USDT you need to top-up the specific isolated margin account. Assets from that account can not be used to short any other cryptocurrencies. In this case, liquidation risk is spread only to one account, and can not affect others.

You can use margin trading to long and short cryptocurrencies. “Cross” gives you a 3x leverage and the “Isolated” - is 10x. 

Step-by-step Tutorial on How to Short BTC on Binance using Margin Trading

1. You need to transfer funds to your margin wallet. Click on the “Wallet” tab at the top of the page, choose “Margin”, then click “Transfer”. Move your funds from the spot to the margin account.

2. Now you can start margin trading. Click the “Trade” tab at the top of the page, then “Margin” to switch to the margin trading interface.

3. To choose the cryptocurrency you want to trade, click “Markets”.

4. You can place a sell order borrowing crypto from the exchange. Click on the “Borrow” tab, then enter the amount of cryptocurrency you want to trade and the price you want to sell it at.

5. To close your position and repay the loan choose the “Repay” option on the left side and click “Buy”.

How to Short Crypto on Binance Futures Trading?

Binance Derivatives offers two types of Futures contracts - Perpetual and Delivery. 

Perpetual contracts have no expiration date, you can hold your position as long as you need to. Delivery contracts are quarterly settled and you have to sell or buy the underlying asset at a predetermined price and expiration date. 

There are COIN-Margined and USD-Margined contracts. The first one is settled in cryptocurrency, you can use coins you hold as collateral instead of stablecoins. The second one uses USDT or BUSD for settlement. 

Both contracts can offer up to 125x leverage. 

We will take an example of the Dogecoin Binance USD-M Perpetual contract as this is the easiest to start with.

Step-by-step tutorial on how to short Dogecoin Binance futures

1. Go to the “Wallet”, choose “Futures” and transfer funds to the USD-M futures wallet.

2. Click the “Derivatives” button at the top of the page and choose “USD-M Futures”

3. Choose the “USDT Perpetual” option and the “DOGE/USDT” contract.

4. Choose the leverage you want to use and enter the amount you want to trade.

5. Set the Take-Profit and the Stop-loss, then click on the “Sell/Short” button to sell the contract.

How to Short Cryptocurrency on Binance with Leveraged Tokens?

This is the easiest way how to short with leverage on Binance. 

There are two types of leveraged tokens. Taking the example of how to short Bitcoin on Binance, we have BTCUP and BTCDOWN. The first one generates boosted gains when the BTC goes up, and the second one when the price drops down. Same with the other cryptocurrencies. 

Binane leveraged tokens (BLTV) don’t have constant leverage, instead, it uses the range from 1.25x to 4x to maximize profits and minimize risks. The leverage will increase when the asset goes up, and decrease when the price goes down. 

This type of token is trading on the spot market and has in-built leverage. That is why you don’t need to use an additional wallet and manage your position. Also, you don’t need to repay the loan or settle the contract. Just buy the token with the ticker DOWN and sell it when reaches aimed lower level.

How to Short Crypto Using Leveraged Tokens Step-by-Step

1. Click the “Derivatives” on the top of the page and choose “Leveraged tokens”

2. Select the leveraged token you want to short and click on the “Trade” button

3. Enter the amount of the leveraged token and click on the “Buy” button.

4. You can close your position through the “Open Orders” menu or by simply selling “DOWN” tokens.

How to Short Crypto on Binance Without Leverage?

Shorting-selling cryptocurrency without borrowed funds may be a more attractive option for some traders due to its reduced risk. 

Here’s how to short crypto without leverage using spot trading, options trading, or futures trading:

Spot trading is a way to buy or sell cryptocurrency at the current price and then buy it back at a lower level. If you sell Bitcoin at $50,000 and then buy it back at $40,000, you would make a profit of $10,000.

This method should be used for the crypto you wish to buy back. Profits here are coming from an enlarged position (as the token became cheaper), or from the stablecoins left after buying back the same amount of the asset. 

Options trading allows traders to buy or sell cryptocurrencies at a fixed price at a future date, shielding them from potential market volatility. To short cryptocurrency, a trader might purchase a put option. 

A put option gives the holder the right to sell the cryptocurrency at a certain price later. If the cryptocurrency falls below the predetermined level, the trader can sell it at a higher level and profit. If the cryptocurrency rises, the trader can let the option expire, and their only loss will be the premium paid for the option. 

Buying put options allows traders to control their risk while still benefiting from a cryptocurrency's possible price decline.

Futures trading can be used at a 1x leverage. In this case, you are trading with your own funds eliminating the risk of liquidation. 

What are the Fees for Shorting Crypto on Binance?

Shorting crypto can be a lucrative trading approach, but traders must have an understanding of the fees that come along with it. Let's break down the fees associated with each method:

It charges interest on the borrowed funds used for margin trading. 0.02% and 0.1% per day, depending on the borrowed amount and the cryptocurrency. Additionally, there are funding fees that occur every eight hours. These fees depend on the market conditions and can either be positive or negative, depending on the current finding rate.

There is a  trading fee of 0.02% for makers and 0.04% for takers on futures trades. Additionally, there is a funding fee that occurs every eight hours, which is based on the difference between the current price and the contract cost.

The exchange imposes a daily management fee of 0.01% on leveraged tokens. This fee is based on the token's notional value and is removed from the token's net asset value (NAV) on a daily basis. There are also rebalancing costs, which are incurred when the token is rebalanced to maintain its goal leverage ratio.

How to Reduce Trading Fees 

By using Binance Coin or the referral program, you can lower the fees connected with shorting cryptocurrency on the exchange.

1. Binance Coin (BNB) is a token you can use to pay trading fees. If you have BNB in your account, it can be used to pay trading costs instead of stablecoins.
2. Binance offers a referral program in which you can earn a commission on the trading fees of customers you recommend to the site. You will receive a commission on a user's trading costs if you refer them to the exchange. The commission begins at 20% and gradually declines.