How to short Bitcoin on Kraken?

To short Bitcoin on Kraken, activate margin trading, borrow BTC, sell it immediately, and buy back later at a lower price to profit — but manage risk carefully due to volatility and potential liquidation.

Jul 23, 2025 at 02:28 am

Understanding Short Selling in Cryptocurrency

Short selling Bitcoin on Kraken involves borrowing BTC and immediately selling it, with the intent to buy it back at a lower price in the future. This strategy is used when a trader believes the price of Bitcoin will decline. Unlike traditional spot trading, shorting requires a margin account and a solid understanding of leverage. On Kraken, this is done through their margin trading platform, which allows users to open short positions. It’s critical to distinguish between spot and margin trading — spot trading does not allow shorting, while margin does. Always ensure your account is verified for margin trading before proceeding.

Setting Up a Kraken Margin Account

Before shorting Bitcoin, you must activate margin trading on Kraken:

• Log in to your Kraken account and navigate to the "Funding" tab
• Select "Margin" from the dropdown menu
• Click "Enable Margin" and agree to the terms
• Complete any additional identity verification if prompted
• Deposit funds into your margin wallet — this can be USD, EUR, or stablecoins like USDC
  Important: Only transfer funds to the margin wallet, not the spot wallet, as short positions are funded from the margin balance.
  

  Placing a Short Sell Order on Kraken

  
  Once your margin account is active, follow these steps to short Bitcoin:
• Go to the "Trade" section and select the BTC/USD pair
• Switch the interface from “Spot” to “Margin”
• Choose the order type — limit or market — depending on your entry strategy
• Enter the amount of BTC you want to short (this amount is borrowed from Kraken)
• Set your leverage — Kraken allows up to 5x for BTC/USD
• Click “Sell/Borrow” to execute the short position
  Note: The borrowed BTC is instantly sold for fiat, and that fiat is held as collateral in your margin wallet. Your position is now live and will show a negative BTC balance.
  

  Managing Risk and Monitoring Your Position

  
  Shorting Bitcoin carries significant risk due to price volatility. Kraken uses a maintenance margin system — if your equity falls below a certain threshold, you’ll face a margin call or automatic liquidation. To manage risk:
• Set a stop-loss order to limit potential losses if the price rises unexpectedly
• Monitor your margin level in real time via the “Positions” tab
• Avoid using maximum leverage unless you have a high-risk tolerance
• Consider setting a take-profit order to automatically close the position when your target price is reached
  Remember: Liquidation occurs when your margin level drops to 20% or below — this means Kraken will close your position automatically to prevent further losses.
  

  Repaying the Loan and Closing the Position

  
  To close your short position, you must buy back the same amount of BTC you borrowed and return it to Kraken:
• Go to the “Positions” tab and locate your open BTC short
• Click “Close” next to the position
• Kraken will automatically buy the required BTC at the current market price
• The purchased BTC is returned to the lender, and any remaining funds (profit or loss) are credited to your margin wallet
• If the buy-back price is lower than your initial sell price, you profit from the difference minus fees
  Crucially: If the BTC price increased instead of decreased, you’ll incur a loss — this is the core risk of shorting.
  

  Fees and Interest on Margin Positions

  
  Kraken charges two types of costs when shorting:
• Trading fees: Based on your 30-day volume, typically between 0.16% and 0.26% per trade
• Borrowing fees: Charged hourly on the borrowed BTC amount — this varies depending on market demand for shorting
• These fees are deducted automatically from your margin wallet
  Always check the current borrowing rate before opening a position — high demand to short BTC can make fees expensive. You can view real-time rates in the “Borrowing” section of the margin interface.
  

  Frequently Asked Questions

  Can I short Bitcoin on Kraken without a margin account?
  
  No. Shorting requires a margin account. If you try to short in the spot market, you’ll only be able to sell BTC you already own — not borrow and sell new BTC.

  What happens if my short position gets liquidated?
  
  If your margin level drops to 20% or below, Kraken will automatically close your position at the current market price. You’ll lose your initial collateral, and no further action is needed from you.

  How do I know how much BTC I can short?
  
  Kraken calculates your maximum shortable amount based on your available margin and the selected leverage. This is shown in real time when you enter an order in the margin trading interface.

  Is there a time limit for keeping a short position open?
  
  No fixed time limit exists, but you must pay hourly borrowing fees while the position is open. These fees accumulate over time and can erode profits or increase losses if the position remains open for days or weeks.