The Ultimate Guide on How to Short Crypto on Coinbase

Ready to level up your crypto trading skills? 

Learn how to short crypto on Coinbase to profit from market downturns. We'll cover

• How you can short on Coinbase 
• Coinbase Nano Futures Contract
• Its Pros and Cons
• How it works
• Margin trading

Plus, you will see examples of shorting Nano Bitcoin and going long on Nano Ethereum futures.

We'll also give you a list of brokers to trade Coinbase Nano Futures and show you how to connect a broker account to a Coinbase account.

How to short crypto on Coinbase 

There is no short way for shorting crypto on Coinbase, but here is a short list of steps to achieve that:

1. Go to the Coinbase Derivatives Exchange page.
2. Pick one of the partnered brokers.
3. Get a broker account.
4. Connect your broker account to a Coinbase account. 
5. Short the Coinbase Nano Futures contract for BTC or ETH. 

The only way you can short crypto on Coinbase is via the Nano Futures Contracts. That is the form of futures contracts, representing 1/100th part of Bitcoin or 1/10th part of Ethereum. 

Due to the regulatory environment, Margin Trading was disabled. For now,  Coinbase is waiting for the approval of its own futures trading. That is why shorting on this exchange can be implemented with the help of futures. 

To access futures trading on Coinbase, you will need to use Coinbase Derivatives Exchange through retail brokers. At the end of this article, there is a list of partner brokers that are legally capable of maintaining derivative contracts for Coinbase in the U.S. 

You need to get an account in one of the brokers' services to short Bitcoin and Ethereum futures contracts which are marked with BIT and ET tickers. 

For now, it is the only crypto available for shorting on Coinbase.

After registering at a retail broker firm, you also need to connect your broker account to your Coinbase account. The process looks like an API connection, which is not hard. You will have instructions at the broker service. 

Let’s dive into each step and answer questions you probably have. 

What is the Coinbase Nano Futures Contract?  

The Nano Future is a cash-settled, monthly futures contract that enables you to long and short crypto on Coinbase, trade on margin, or hedge your position. 

A cash-settled, monthly futures contract is a type of futures contract that settles in cash instead of physical delivery of the underlying asset and expires at the end of each month.

You can speculate on the asset’s price with a crypto futures contract. One of two contract’s counterparties, that gets the wrong position (short or long), pays a settlement in cash to the other counterparty. 

Each contact is worth 1/100th of a Bitcoin or 1/10th of an Ethereum and provides a legal way to trade the highly liquid crypto derivatives market.

You can find BIT or ET tickers on a broker’s trading platform. You will also see a letter and a number like BITG23 or ETM23. Those a coded settlement dates, indicating contract expiration.

The letter stands for the month, while the number is for the year. BIT-G-23 contract will be settled in February 2023 and the ET-M-23 in June 2023.

Here is the list of contract month codes for Coinbase Nano Futures, so you won’t buy anything you don't need.

Coinbase Nano Futures Contract Month Codes:

 

MONTH	MONTH CODE
January	F
February	G
March	H
April	J
May	K
June	M
July	N
August	Q
September	U
October	V
November	X
December	Z

Pros and Cons of trading Coinbase Nano Futures 

In comparison with the spot market, where you buy and sell a “real” cryptocurrency without time limitation. Futures contracts can be traded instantly with a fixed settlement date, which allows you to trade crypto not owing a single token.

After getting to know futures contracts we can compare them to a good old spot market to see the benefits and negative sides of Coinbase Futures trading.

Pros of trading Coinbase Nano Futures:

• Shorting 
• Hedging
• Leverage
• Low-budget level

The first three points are probably exactly what you are looking for. Whether you want to short crypto on Coinbase for profit or hedging, or you are looking for margin trading to leverage your position. 

Those pros are a great combination with an opportunity to trade derivatives on a low budget. You have to buy at least one contract that can not be divided. Coinbase Nano Future contract is a small enough part of BTC or ETH to be as affordable as possible. 

Cons of trading Coinbase Nano Futures:

• Risk of liquidation
• The need to use a broker 
• External soft 
• Not for amateurs 

The obvious one is that you need a deposit as collateral to take certain positions, like shorts or margin longs. Here is the room for liquidation, where you can lose your trading deposit.  

Due to regulatory reasons, Coinbase can not maintain futures trading in the U.S. fully on its platform. So you need to have a broker account to access derivatives and to use the broker’s soft to complete trades. 

Overall we can say that the Coinbase Nano Futures is the instrument for PROs who are aware of the derivatives market, can manage risks, and are capable of using external soft. 

How the Coinbase Nano Futures Contract works

When a buyer enters into a cash-settled, monthly futures contract, they are agreeing to purchase the underlying asset at a set price on a specific date in the future. 

However, instead of taking physical delivery of the asset, the buyer and seller settle the contract in cash, based on the difference between the agreed-upon price and the market price of the asset at the time of expiration.

Futures contracts came from a traditional finance market with unique features and rules. We will break through its main characteristics and principles of how it works. 

You will want to know when to trade, how to calculate contract size, and how the price action of the Coinbase Nano Futures contract works.

How do you go short with crypto?

Basically, you need to sell assets to buy them lower. How do you sell assets you don't own and why do you need them later? That is because you need to borrow assets from the crypto exchange to sell (take a short position), and then you need to buy them back (take profit) to cover your debt to the exchange. The lower you bought back a crypto asset, the more you earned. 

What are Coinbase Nano Futures trading hours?

You can trade Nano Bitcoin futures contracts from Sunday to Friday, from 6 p.m. to 5 p.m. ET. The same is for Nano Ethereum Futures. 

Both trading pairs take a break for 1 hour from 5 p.m. to 6 p.m. 

How to calculate the Coinbase Nano Futures contract? 

One of the main benefits of Nano contracts is that they are divided by 1/100 or 1/10 from the original asset like BTC or ETH. Let's make it clear how much the contract will cost. 

Bitcoin Nano Futures [BIT] is 1/100th of the BTC. 

If BTC = 10,000 $, then BIT = 100 $. Because 1/100*10,000$=100$. 

Ethereum Nano Futures [ET] is 1/10th of the ETH.

If ETH = 1,500 $, the ET = 150 $. Because 1/10*1,500$=150$

How the price action of the Coinbase Nano futures Contact works?

The price of Nano Futures is tight to the Bitcoin price, so it will represent the spot price with a settlement date and price of the contract that are predetermined 

Nano Bitcoin Futures price chart can reflect a minimum $5 increments of BTC price move. That will represent a $0.05 change in the value of the BIT contract. 

Nano Ethereum Futures price chart can reflect a minimum $0,5 increments of ETH price move. That will represent a $0.05 change in the value of the ET contract. 

Coinbase Margin trading 

You can not add leverage on the Coinbase exchange, but you can access U.S. legal margin trading with the Coinbase Nano Futures. 

Nano Bitcoin and Ethereum futures contracts can add around 30% margin to your trades, meaning you need less upfront capital (only 30% of the contract value) to enter a position.  

Let’s look at the calculation:

If BTC = 10,000 $, then BIT = 100 $, then margin position = 30 $

Because 1/100*10,000$*0,3=30$

How to short Nano Bitcoin Futures - example

Imagine the 1st of July 2023, the August Nano Bitcoin Futures [BITQ23] are trading at $50,000. You want to enter a short position, and here is what it looks like: 

5 BITQ23 contracts to sell at $50,000 will cost you $2,500 [1/100*50,000*5]

The capital you need with a 30% margin is $750 [300*0.3]

On Jul 17th, 2023 your BITQ23 is trading at $24,000, and you decide to close the position by buying BIT. In that case, the profit will be $1,300. 

($50,000 - $24,000) * 0,01 * 5 = 1,300 $ 

(Current Price - Sell Price) * 1/100 * Amount of Contracts

How to long Nano Ethereum Futures - example

Imagine the 1st of February 2023, the March Nano Ethereum Futures [ETH23] are trading at $1,000. You want to enter a long position, and here is what it looks like: 

3 ETH23 contracts at $1,000 will cost you $300 [1/10*1000*3]

The capital you need with a 30% margin is $90 [300*0.3]

On Fed 19th, 2023 your ETH23 is trading at $1,500, and you decide to sell the position. In that case, the profit will be $150. 

($1,500 - $1,000) * 0,1 * 3 = 150 $ 

(Current Price - Buy Price) * 1/10 * Amount of Contracts

List of brokers to trade Coinbase Nano Futures  

Coinbase Derivatives Exchange is the futures exchange that is regulated by CFTC. After the transformation from FairX, it partnered with 6 brokers to legally maintain futures trading for U.S. users.

Here is the list of brokers to trade Coinbase Nano Futures: 

1. EdgeClear
2. IronBeam 
3. NinjaTrader 
4. Optimus Futures 
5. Stage 5
6. Tradovate 

Behind the work of a broker, there is a role of clearing firms that keep the process working. Coinbase partnered with the next clearing firms to keep it clear: 

1. ABN
2. AMRO
3. ADMIS
4. Advantage Futures 
5. Dorman Trading 
6. ED&F Man 
7. Ironbeam 
8. Webbush

How to connect a broker account to a Coinbase account

Now you will get an example of instruction on how to connect a broker account to a Coinbase account. Worth mentioning that each broker is unique and you have to follow their instructions.

We’ve taken a Ninja Trader as an easy example for you.

1. Open Ninja Trading terminal
2. Click “configure” in the “Connections” section 
3. Choose Coinbase from the list of available exchanges 
4. Create a Connection name 
5. Activate your connection in the “Connections” sections

Open Ninja Trader Control Center, then “Connections and “configure’.

From the list “Available” you can choose the “Coinbase” option. Lower will be the “Configured” window, you need to click “add”.

Then you will get access to the “Properties” window on the right.

Create a name to mark the connection in the “Connection name” field. Click “Connect on start up” if you want to establish a connection automatically on Ninja Trader start up. 

Press OK

To connect to your Coinbase account you click on Your Connection Name in the “Connections” section in the Ninja Trader terminal.

You will see the status of your connection in the left bottom corner and right to Your Connection Name. 

How to maximize profit from shorting crypto on Coinbase?

Timing your trades

Timing is also crucial when shorting crypto on Coinbase. 

It's important to enter your short position at the right time when the price of the coin is at its peak and most likely to drop. 

This may require monitoring the market closely and having a good understanding of technical analysis.

Pay attention to indicators 

You can use a variety of metrics and indicators that will help you to analyze the market and maximize your profit. One of the simplest is the Long to Short Ratio. 

The Long to Short Ratio indicator is a tool used to assess the level of bullishness or bearishness among traders in a particular market. It is calculated by dividing the number of long positions (bets that an asset will increase in value) by the number of short positions (bets that an asset will decrease in value). 

A high ratio indicates that there are more long positions than short positions, indicating a bullish market, while a low ratio indicates that there are more shorts than longs, indicating a bearish market.

You can easily see whether bulls or bears are now in charge on our Long to Short Ratio metri pacge. 

Setting stop-loss orders

To minimize potential losses, it's important to set stop-loss orders when shorting crypto on Binance. 

A stop-loss order is an order that automatically closes your position if the price of the coin reaches a certain level, preventing further losses. 

This can help you to avoid losing more than you can afford and limit your risk.

Feel the market 

You need to understand the current sentiment on the market. What it’s driven by, like news, market players' moves, or macro economical state and shifts.

Your target is to see the right trend and follow him. That process requires a lot of attention to the information that flows through the market. 

That is why you want to catch up on news, read analyses from top traders, and screen the crucial market metrics. And you will get that. The Btcman news page will provide you with the right flow of information.

Final words

The Coinbase Nano Futures Contract, with its ability to trade with leverage, is a great option for speculation on crypto prices. As always, it is important to weigh the pros and cons, understand how the contract works, and be aware of the risks involved in margin trading.

Due to regulatory reasons, there is no way to short crypto directly on Coinbase. As you can see this process requires a lot of effort to take a short position on this exchange. If you want to go the easy way, here is the list of best exchanges to short crypto.

We hope this article has provided a helpful overview of how to short crypto on Coinbase, including examples of shorting Nano Bitcoin and going long on Nano Ethereum futures, pros and cons of futures trading, a list of brokers, and a guide on how to connect a broker account to a Coinbase account.

F. A. Q. 

Can I short crypto on Coinbase?

Due to the regulatory environment, the U.S. crypto exchanges can not maintain margin or futures trading on their platforms that could allow you to short crypto on Coinbase. But there is a Coinbase Derivatives Exchange that gives you access to trading BTC and ETH futures contracts through the partnered brokers.

How to short crypto on Coinbase Pro?

The main differences between Coinabase Pro and the regular one are the interface, advanced chart analysis, and more types of orders. But you still need the Coinbase Derivative Exchange to short Bitcoin or Ethereum Nano futures contracts through the partnered brokers.

Can you short crypto without leverage?

If you need to short crypto without leverage, you still need to use the same financial instruments. In both margin and futures trading, leverage is just an option for you. You are not pushed to borrow more assets than you need.

Can you short Ethereum on Coinbase?

Due to the regulatory environment, you can not short Ethereum on the Coinbase exchange directly. Instead, you can use Coinbase Derivatives Exchange to take a short position on the Nano Ethereum futures contract through the partnered brokers. 

Can you short Dogecoin on Coinbase?

Earlier there was a 3X Short Dogecoin Token that was allowing you to short Dogecoin on Coinbase by simply buying it. But not U.S. crypto exchanges are not allowed to maintain futures and margin trading. That is why the only assets you can short are Bitcoin and Ethereum futures contracts on the Coinbase Derivatives Exchange through the partnered brokers.