Can You Short on Kraken?

Crypto trading offers so many opportunities and options in which you can earn money. One of the riskier ways to trade with crypto is shorting. Shorting is mostly done on Bitcoin because its price is high, but you can do the same on other cryptos. If you think about can you short on Kraken, you are in the right place. Let’s see what your options are in crypto trading on Kraken.

Can you short on Kraken? The answer is yes. Kraken is a spot market allowing you to sell and buy crypto on the spot. You can short numerous crypto on Kraken using margin trading.

Exchange board with numbers

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This probably sounds complicated, and to be fair, it is. But once you figure out how this system works, you will be able to start trading. If you have previous experience in stock trading, then this will be a pretty similar process. Here is how margin trading works on Kraken. 

Can You Short on Kraken? Learn Your Options in Shorting Crypto

Let’s start by explaining what short crypto trading is. Short trading crypto means you sell crypto for a higher price in the hope the price will fall later on, and you will be able to buy it for a smaller amount. The whole idea behind this is that you borrow crypto from a third party and sell it at the market price, after which you are waiting for that crypto value to drop so you can, ideally, buy back more crypto than you had. The profit you will make will be a difference between borrowed amount plus interest and the amount you got from the sale.   

What Is Margin Trading? How Margin Trading Works on Kraken

Margin trading is, simply put, borrowing money from the broker in order to make a trade on the market. With margin trading, you are actually taking a loan from a broker (in this case, Kraken) to make a trade and buy crypto. You can use margin trading to buy currency on the spot, long and short.

So let’s first explain what is spot trading. It is a simple trade. You put money into your account and buy a certain amount of crypto with it. Kraken allows spot trading on margin meaning the balance you put on your account can be increased by the amount you put on your position. This is called leverage, meaning you are trading with the amount of money you don’t have on the balance. Once you have opened the spot position on margin, you can then choose whether you want to sell long or short. Even though short selling is probably most popular with Bitcoin, Kraken does allow margin trading with other currencies. Here are some of them:

  • ETH,
  • BTC,
  • XRP,
  • SOl,
  • USDC,
  • XLM,
  • DOGE,
  • ETC,
  • DOT,
  • DASH,
  • BCH.

First, You Need to Open a Spot Position on the Margin 

In order to make margin trading, you first need to have a balance on your account. You can not make a spot position with zero balance. The margin in your account will be set by the number of funds you have, and this is called free margin. If you wish to make a purchase that exceeds your balance, you will have to leave leverage. The leverage is determined by two things – your maximum “position size” and your used margin. You can enter short and long positions using margin. By entering the long position, you are purchasing an asset in anticipation of the price increase. If you put a short position, you are selling an asset you don’t have in anticipation of price decreasing.

Man holding a phone with exchange opened

How to Settle Short Position? 

As we explained, in order to set up a spot position on margin, you need to have enough assets in your balance. You can settle your position with the funds you have on balance, or you can add additional funds by depositing money. Make sure you have the funds or the currency on your balance that is supported by Kraken. To settle a short position on BTC for example, you must return to Kraken as much BTC as you sold on the market for EUR. This will settle the obligation you have towards the Kraken when you open the position.

Still, there are other ways to sell crypto on the margin on Kraken and earn some money. Let’s see the main differences between them.

You are selling the asset you don’t have and hoping the price will decreaseYou are purchasing an asset you don’t have in the hope of price increasingYou can flip your exposure to a currency from long to  short by opening a margin with higher volume than your current marginYou are opening both positions long and short in the same order book
Allowed on KrakenAllowed on KrakenAllowed on KrakenOnly indirect hedging is allowed on Kraken

Should I Make Margin Trade?

As you can see, margin trade can be quite profitable, but it is important that you know your way around the crypto market. You need to know which crypto is worth shorting and which one is not. The goal is not to lose much, so you need to be careful when to close your position as well. If you are new to crypto trading, margin trade can be an excellent way for you to invest much more money than you have. If you are shorting crypto, make sure to sell that crypto on time. As you know, crypto is not a stable currency, and a lot of things can influence its price. The best advice is to look at the market charts and how that currency behaved in the last 24 hours. Still, this will not be a guarantee, so note that all investment in crypto comes with a risk.