Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi guys, Thx for all your responses to so many questions & I’m truly impressed by the range of topics you find answers for. On the question of ‘shorting’, I generally understand the process but you mentioned in your Tuesday morning report about crypto’s; “It’s an indication that short sellers are dominating and paying longs to hold their positions”. So I’d appreciate further explanation about what you mean and costs of doing this stuff. Thx Glenn
Hi Glenn,
When you short something, you pay a borrow fee to the lender. If the position being shorted is hard to borrow (limited supply, high demand for shorts), the rate paid will go up, and this is what we highlighted in our Crypto peice on Tuesday – essentially the cost of shorts had increased because there was more demand on the short side relative to the long side.
Shorting more generally is an interesting subject:
Traders can short cryptocurrencies, but the mechanism is different from traditional stock shorting because crypto markets operate under different rules — there are no brokers lending physical assets like shares. Instead, crypto shorting is usually done via Futures and perpetual contracts on platforms like Binance, Bybit, OKX, etc, but the same mechanisms around the costs prevail, and the same read throughs apply.
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