How to short Bitcoin on BitMEX

Shorting Bitcoin on BitMEX involves opening a short position in XBTUSD perpetual swaps, using XBT as margin, and profiting from price declines—gains are in XBT, but risks include liquidation and funding payments.

Aug 11, 2025 at 02:35 pm

Understanding Short Selling on BitMEX

Short selling Bitcoin on BitMEX allows traders to profit from a decline in Bitcoin’s price without owning the asset. This process involves borrowing Bitcoin (or its synthetic equivalent in a derivatives context) and selling it at the current market price, with the intention of buying it back later at a lower price to return it and capture the difference. BitMEX does not offer spot trading; instead, it operates exclusively with perpetual swap contracts and futures contracts, which are leveraged derivatives. When you short Bitcoin on BitMEX, you are opening a short position in one of these derivative contracts.

The key concept behind shorting is the use of inverse contracts, where the margin and profit/loss are denominated in Bitcoin (XBT), not in USD. This means that when you short Bitcoin, your gains are realized in XBT if the price drops. BitMEX offers high leverage, up to 100x on certain contracts, which amplifies both potential profits and risks. It is essential to understand that liquidation can occur if the price moves against your position and your margin balance falls below the maintenance threshold.

Selecting the Right Contract

Before shorting Bitcoin, you must choose the appropriate contract. BitMEX lists several Bitcoin-based derivatives. The most commonly used for shorting is the XBTUSD Perpetual Swap. This contract is settled in XBT and tracks the Bitcoin/USD price via an index composed of multiple exchanges. It does not have an expiry date, making it ideal for traders who want to maintain a position indefinitely.

To locate the correct contract:

• Log in to your BitMEX account
• Navigate to the "Trade" section
• Search for XBTUSD in the contract list
• Confirm that the contract type is "Perpetual"
• Check the current funding rate, displayed next to the contract name

The funding rate is critical when holding a short position. If the rate is positive, short sellers pay longs; if negative, longs pay shorts. This payment occurs every 8 hours and can impact your profitability over time. Always review the funding rate before opening a position.

Setting Up Your Short Position

Once you have selected the XBTUSD contract, you can proceed to open a short position. The following steps outline the exact process:

• Click on the "Sell" button in the order entry panel
• Choose your order type: Market, Limit, or Stop
• Enter the quantity in contracts (each XBTUSD contract represents $1 of Bitcoin value)
• Select your leverage level using the leverage slider
• Review the estimated liquidation price displayed below
• Confirm and submit the order

For example, if Bitcoin is trading at $60,000 and you sell 10,000 XBTUSD contracts, you are effectively shorting $10,000 worth of Bitcoin. If you use 10x leverage, your initial margin requirement will be approximately 10% of the position value. BitMEX calculates margin in XBT, so your wallet balance must have sufficient Bitcoin to cover the margin.

It is highly recommended to use a limit order instead of a market order to avoid slippage, especially during volatile market conditions. A limit order allows you to specify the exact price at which you want to enter the short position.

Managing Risk and Avoiding Liquidation

Shorting Bitcoin with leverage carries significant risk, particularly the possibility of liquidation. BitMEX uses a mark price to determine liquidation levels, which is based on external exchange data to prevent manipulation. If the mark price reaches your liquidation price, your position will be automatically closed.

To reduce the risk:

• Monitor your maintenance margin requirement, which increases with higher leverage
• Use stop-loss orders to cap potential losses
• Avoid using maximum leverage unless you have a high-risk tolerance
• Keep additional XBT in your wallet as a buffer against margin calls

You can set a stop-loss by:

• Going to the "Order" tab
• Selecting "Stop" or "Stop Limit" order type
• Setting the trigger price above your entry (since you're shorting)
• Entering the quantity to close your entire position
• Submitting the order

This stop-loss will automatically close your position if the price rises to your specified level, preventing further losses. Remember that during extreme volatility, stop orders may execute at worse prices than expected due to gaps in pricing.

Closing Your Short Position

When you decide to exit your short position, you must buy back the same number of contracts you initially sold. This action is known as "covering" your short. To close the position:

• Navigate to the "Order" section for the XBTUSD contract
• Click on the "Buy" button
• Enter the same number of contracts you originally sold
• Choose a market order to close immediately or a limit order to target a specific price
• Confirm and submit the order

Upon closing, your profit or loss will be calculated in XBT and added to or subtracted from your wallet balance. For instance, if you shorted 10,000 contracts at $60,000 and bought back at $55,000, your profit would be approximately 0.0757 XBT (before fees and funding). BitMEX charges a taker fee of 0.075% for market orders and a maker rebate of 0.025% for limit orders that add liquidity.

Always review your position history and transaction log in the "Account" section to verify the execution and settlement of your trade.

Frequently Asked Questions

Can I short Bitcoin on BitMEX without any Bitcoin in my wallet?

No, you must have Bitcoin (XBT) in your wallet to use as margin. Since BitMEX uses inverse contracts, all margin and P&L are denominated in XBT. Without a Bitcoin balance, you cannot open a leveraged short position.

What happens if my short position gets liquidated?

If the mark price reaches your liquidation price, BitMEX will automatically close your position. You will lose the margin allocated to that trade. In extreme cases, if the system cannot close the position fast enough, you may face an auto-deleveraging (ADL) event, where profitable long traders are forcibly closed to cover losses.

How are funding payments calculated when shorting Bitcoin?

Funding is exchanged every 8 hours between long and short positions. If the funding rate is positive, shorts pay longs. The amount is based on your position size and the prevailing rate. You can view upcoming funding times and rates in the contract details.

Is it possible to short Bitcoin on BitMEX using a mobile device?

Yes, BitMEX provides a mobile app for iOS and Android that supports full trading functionality. You can open, manage, and close short positions directly from the app, including setting stop-losses and adjusting leverage. Ensure your device is secure and use two-factor authentication.