How to short Bitcoin on Bybit using contracts?

Shorting Bitcoin on Bybit allows traders to profit from price declines using USDT or BTC-margined perpetual contracts with leverage, requiring careful risk management.

Aug 09, 2025 at 03:50 am

Understanding Bitcoin Shorting on Bybit

Shorting Bitcoin on Bybit involves opening a short position in a perpetual or futures contract, allowing traders to profit from a decline in Bitcoin’s price. Unlike buying Bitcoin outright (going long), shorting means you are betting that the price will drop. When you short, you sell borrowed contracts at the current market price and aim to buy them back later at a lower price, pocketing the difference as profit.

Bybit offers inverse and linear perpetual contracts for Bitcoin, both of which support shorting. The key difference lies in the settlement currency: inverse contracts settle in BTC, while linear contracts settle in USDT. Traders must understand leverage, margin, and liquidation price before initiating a short. Leverage allows you to control a larger position with less capital, but it increases both potential gains and risks.

Setting Up Your Bybit Account for Shorting

Before shorting Bitcoin, ensure your Bybit account is fully set up and verified.

• Register at bybit.com and complete KYC verification if required for higher withdrawal limits.
• Deposit funds into your Derivatives Wallet. For USDT-margined contracts, deposit USDT. For inverse contracts, deposit BTC.
• Navigate to the Contracts section from the top menu.
• Select Perpetual Contracts and choose the BTC/USDT or BTC/USD pair depending on your preferred margin type.

Ensure two-factor authentication (2FA) is enabled for account security. Also, check your risk tolerance settings and set up stop-loss orders in advance to manage downside exposure.

Choosing the Right Contract Type

Bybit provides two primary contract types suitable for shorting Bitcoin:

• USDT-margined Perpetual Contracts (BTC/USDT): These are ideal for beginners due to their stablecoin denomination and straightforward PnL calculation. Profits and losses are settled in USDT, making it easier to track value.
• Inverse Perpetual Contracts (BTCUSD): These are margined and settled in BTC. While experienced traders may prefer them for hedging BTC holdings, PnL is more complex because it’s denominated in BTC, which itself is volatile.

For most shorting strategies, BTC/USDT is recommended due to predictable margining and easier risk management. Confirm your selection by clicking on the correct trading pair in the interface.

Executing a Bitcoin Short Trade

Once you’ve selected your contract, follow these steps to open a short position:

• Switch from Cross Margin to Isolated Margin mode if you want to limit risk to a specific amount. Cross margin uses your entire wallet balance as collateral, increasing liquidation risk.
• Set your leverage using the slider. For example, 10x means you control 10 times your margin. Higher leverage increases profit potential but also liquidation risk.
• Enter the order size in USDT or number of contracts.
• Choose your order type:
  • Market Order: Executes immediately at current price. Use this when you want to enter fast.
  • Limit Order: Sets a specific price to enter. Useful if you anticipate a pullback before further decline.
• Click Sell (not Buy) to open a short position.

After execution, your open position will appear in the Positions tab. Verify that the entry price, liquidation price, and margin are correct.

Managing and Closing Your Short Position

After opening a short, active management is essential. Monitor:

• Liquidation Price: The price at which your position will be automatically closed to prevent further losses. Keep your maintenance margin above this threshold.
• Unrealized PnL: Shows current profit or loss. As Bitcoin’s price drops, this turns positive.
• Funding Rate: Paid every 8 hours to the counterparty. When funding is positive, shorts pay longs. Check the rate before holding overnight.

To close the position:

• Go to the Positions tab.
• Click Close or place a Buy order of the same size.
• Choose Market to exit immediately or Limit to wait for a target price.
• Confirm the transaction.

After closing, your realized PnL will be credited to your Derivatives Wallet.

Risk Mitigation and Best Practices

Shorting Bitcoin carries substantial risk, especially in volatile markets. Consider these strategies:

• Always set a stop-loss order just above key resistance levels to limit losses if the market reverses.
• Avoid maximum leverage; 5x–10x is safer for most traders.
• Use take-profit orders to secure gains at predefined levels.
• Monitor market sentiment, news events, and technical indicators like RSI and moving averages before shorting.
• Never short during high-impact news events like halvings or regulatory announcements unless you have a clear directional bias.

Bybit’s liquidation engine acts quickly, so maintaining a healthy margin ratio is critical. You can also use partial close to reduce position size gradually.

Frequently Asked Questions

Can I short Bitcoin on Bybit without using leverage?

Yes. You can set leverage to 1x, meaning you trade with your full margin as collateral. This reduces liquidation risk and functions similarly to a non-leveraged short, though funding fees still apply in perpetual contracts.

What happens if my short position gets liquidated?

If Bitcoin’s price rises to your liquidation price, Bybit automatically closes your position to prevent further losses. The system uses your margin to cover the deficit. You lose the margin allocated to that trade, but no additional funds are taken beyond that.

How are funding fees calculated when shorting Bitcoin on Bybit?

Funding fees are exchanged between long and short traders every 8 hours. The rate is determined by the difference between the perpetual contract price and the index price. If the contract trades above the index (contango), shorts pay longs. Fees are proportional to your position size and are deducted directly from your wallet.

Is shorting Bitcoin on Bybit available to all countries?

No. Bybit restricts access in certain jurisdictions, including the United States, Cuba, Iran, North Korea, and Syria. Users must comply with local regulations. Attempting to bypass geo-restrictions via VPN may result in account suspension.