What does it mean to be short in the currency circle?

Short sellers in the currency circle refer to people or institutions who predict a fall in asset prices and make profits by borrowing assets, selling assets, and then buying back assets after the price falls. The specific steps are: 1. Borrow assets; 2. Sell assets; 3. Wait for prices to fall; 4. Buy back assets; 5. Return the loan. To make a profit from a short position, conditions such as a fall in asset price, a selling price higher than the buy-back price, and borrowing of assets before the price falls must be met; however, it faces risks such as liquidation, borrowing costs, and market manipulation.

What is short selling in the currency circle?

In the cryptocurrency market, a short is a person or institution who predicts that the price of an asset will fall. They bet on falling prices by borrowing assets and then immediately selling them. If the price does fall, shorts can buy the asset back at a lower price and make a profit.

How Shorts Work

1. Borrowing Assets: Shorts borrow crypto assets from exchanges or other institutions.
2. Selling Assets: After borrowing an asset, the short seller immediately sells it for fiat or other cryptocurrencies.
3. Waiting for the price to fall: Shorts expect the price of the asset to fall. If prices do fall, they can buy the asset back at a lower price.
4. Buying back an asset: When the price drops, shorts buy back the asset they originally borrowed at a lower price.
5. Return the loan: After buying back the asset, the short seller will take the difference between the price of the asset sold and the price of the asset bought back as profit. They must also return the borrowed assets to the borrower.

Conditions required for short positions to profit

• The asset price must fall.
• Shorts sell at a higher price than they buy back.
• Shorts are able to borrow the asset before the price drops.

Risks of Short Positions

• Blowout: Short sellers can lose a lot of money if the price of an asset surges instead of falling.
• Borrowing Costs: Shorts need to pay interest on borrowed assets, which can eat into their profits.
• Market Manipulation: Large institutions or whales can manipulate the market, causing prices to rise or fall, causing short sellers to lose money.

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