Long and Short: The Two Sides of Cryptocurrency Trading

When a trader enters the world of cryptocurrencies for the first time, they quickly encounter two fundamental concepts that govern virtually all speculation strategies: long and short. These terms define not only how we operate but also our mindset and market perspective at any given moment.

The Origin of a Millennia-Old Dichotomy

Although it is difficult to precisely trace when these words first appeared in the trading context, records show that as early as 1852, The Merchant’s Magazine and Commercial Review referenced these concepts. The etymology is revealing: long (describes operations that require time and patience, waiting for prices to gradually rise. Short )represents the quick way to profit when prices fall.

Opposite Strategies, Same Goal: Making Money

At the heart of modern trading lie two diametrically opposed positions:

Long Position: Betting Upward

Opening a long means buying an asset expecting its value to increase. Imagine you see a token trading at (and you are certain it will reach $150. The move is simple: buy today and sell later. The profit is the difference between the two prices. In the spot market, this is the most intuitive and accessible operation for beginners.

Short Position: Profiting from the Drop

Here, the logic is completely reversed. A trader who opens a short believes the price will decline, so they borrow the asset from the platform, sell it immediately at the current price, wait for it to fall, buy it back cheaper, and return the borrowed amount.

Let’s take an example with Bitcoin: if it trades at $61,000 and you expect it to drop to $59,000, you can borrow one Bitcoin, sell it now at $61,000, wait for the decline, buy it back at $59,000, and return it. The remaining $2,000 )minus borrowing fees$100 are your profits. Although it may seem complicated in theory, trading platforms automate all this behind the scenes, allowing the user to simply click buttons.

Bulls and Bears: The Market Protagonists

The crypto industry has adopted a natural classification of participants based on their expectations:

Bulls are optimistic. They believe the market will rise, open long positions, and buy assets. Their confidence drives demand and helps push prices higher. The term comes from the image of a bull thrusting its horns upward.

Bears are pessimistic. They expect declines, open short positions, and press prices downward. Like a bear lowering its paws, they generate downward pressure on the market.

From these categories emerge bull markets (bull market) where prices rise steadily, and bear markets (bear market) with widespread declines.

Leverage: The Double-Edged Sword

To maximize profits, traders use borrowed funds. A trader who normally would buy a Bitcoin with $30,000 of their own could use leverage to control multiple Bitcoins with that same amount. Gains are amplified, but so are losses.

This amplification makes monitoring collateral (available margin) critical. If the price moves against your expectations and your margin falls below a certain level, the platform issues a margin call: an alert to add more funds. If you don’t do so in time, the position is automatically closed (liquidation), crystallizing your losses.

Hedging: An Insurance for Your Operations

An experienced trader does not bet everything in one direction. Hedging is a risk management technique that uses opposite positions to reduce exposure.

Practical example: you believe Bitcoin will rise, so you open a long of 2 Bitcoins. But you don’t rule out an unexpected turn, so you open a short of 1 Bitcoin simultaneously as protection.

Bullish Scenario: Bitcoin rises from $30,000 to $40,000

• Long profit: (2 × $10,000) = $20,000
• Short loss: (1 × -$10,000) = -$10,000
• Net result: $10,000

Bearish Scenario: Bitcoin falls from $30,000 to $25,000

• Long loss: (2 × -$5,000) = -$10,000
• Short profit: (1 × $5,000) = $5,000
• Net result: -$5,000

Hedging reduced your potential losses by half, though it also limited your gains. This is the balance of any defensive strategy: paying a “premium” that reduces both risks and rewards.

A common trap: some beginners open positions of equal size but opposite directions, believing they are fully protected. In reality, the gains of one cancel out the losses of the other, and commissions turn the operation into a net loss.

Futures: Where Long and Short Unleash Their Full Potential

Futures contracts are derivatives that allow speculation on prices without owning the physical asset. This is where long and short reach their maximum expression.

In the traditional spot (buy-sell) market, you can only profit if the price rises. Futures allow you to profit from declines by opening shorts. Perpetual futures, very popular in crypto, have no expiration date: you hold the position as long as you want. By maintaining it, you pay (or receive) a funding rate every few hours, reflecting the difference between the futures price and the spot market.

Advantages and Disadvantages of Each Strategy

Long:

• ✓Intuitive and easy to understand
• ✓Works like a traditional purchase
• ✗Gains are limited by the speed of the rise

Short:

• ✓Potential for profit in bearish markets
• ✓Allows strategy diversification
• ✗Logic is more complex and counterintuitive
• ✗Markets fall faster and are less predictable than rises

Final Reflection

Long and short trading is the skeleton upon which all cryptocurrency speculation is built. A competent trader not only understands these concepts but also masters when to use them, how to properly size their positions, and when to apply defensive techniques like hedging. Access to futures and leverage has democratized the ability to make money in any market direction but has simultaneously increased risks. Those who understand this duality and respect risk management will have a solid foundation to navigate crypto markets.