If you have been paying attention to the crypto markets, you undoubtedly heard about how LUNA collapsed at one point. It was used to back TerraUSD, and once that stablecoin broke its peg, LUNA fell apart. At one point, LUNA was at $75, only to plunge below $1 briefly. Understanding how to short LUNA can bring more opportunities.
Short selling LUNA: what does it mean?
When you “short” a financial asset, you bet the price will go lower. You essentially borrow the support from your broker or another trader, sell it to another trader, and then repurchase it to return to the original owner. You are hoping you can buy back the asset for less than you sold it to the second individual.
Luckily, most modern platforms will do all of the backend work for you, and that’s especially true at PrimeXBT, where shorting is available via the CFD market. (More on this later.)
Can You Short LUNA?
Yes, you can. The process will vary depending on how you go about it. Some brokerages offer what are known as “perpetual contracts,” which are essentially futures contracts. You borrow the coins from someone, sell them to somebody else, and then repurchase them, hopefully for less than you sold them for. If you repurchase it more than you sold it to a traitor, you end up taking a loss.
The easiest way by far is to do so with the CFD market. This is because you do not have to worry about borrowing or finding LUNA to start shorting. It directly affects price movement; therefore, all you have to do is execute your trade plan. The CFD market, also known as the “contract-for-difference” market, is just an agreement between 2 parties to bet on the price of an asset, with one paying the other the difference depending on the winner or the loser.
When is a Good Time to Short LUNA?
As a general rule, all crypto moves in the same direction. If it is a massive “risk off” type of environment, it stands to reason that LUNA will fall. Furthermore, LUNA has had plenty of its issues, as we saw it fall apart previously. That being said, the market had once priced LUNA at $75 but found itself dropping below $1 after the TerraUSD (UST), the stablecoin that LUNA backs, lost its peg to the US dollar.
Risks of Shorting LUNA
The risks of shorting LUNA depend on the environment you find yourself trading in. If you are using the CFD market, you will be liquidated if you run out of trading capital or margin. After all, CFD markets are leveraged, meaning that you only put down a small amount of the size you are trading for collateral.
Perpetual futures contracts work very much the same, but there is no guarantee of auto liquidation. In theory, anytime you short a financial asset, you could theoretically lose an infinite amount of money. (This assumes that you can never get out of the position, and it goes all the way to infinity. The thinking is that a specific asset position, buying it that is, can only drop to zero.)
How to Short LUNA Coins – Step-by-Step
To profit from a falling market, you must understand how to short LUNA. Using the PrimeXBT platform makes it very simple and takes very little time.
This allows the trader to take advantage of market opportunities quickly, without worrying about “borrowing coins,” as you may have on a perpetual futures contract.
Remember, you are trading the CFD market, which is a massive advantage as you can leverage your position, meaning that you can control a much more significant role for just a tiny margin. Also, it’s simply a matter of picking your position size and direction and pressing a few buttons.
The first thing you do before any trade is to analyze the entire situation. After all, you do not simply jump into a market and start shorting a position just because you think it will go lower over the longer term. Luckily, the platform at PrimeXBT has a wealth of tools that you can use to decide where to short the market, where to put your stop loss, and where to take profit.
Press Sell Button
Sell/Buy buttons on the top of the charts. PrimeXBT platform.
At this point, you have decided what to do with your position and how much of your work you want to put into the market. You can either simply press the “sell button” or click the “trade” button in the quote panel.
Let the market do its thing!
You are now short LUNA, and everything is done on your end. The platform will execute the stop loss or the take profit order when it is reached. PrimeXBT has everything taken care of on the backend. Remember that markets can do anything they want and don’t necessarily work on your timeline. In other words, once you do your analysis, it is up to the market to decide which one of your orders gets hit first.
Shorting LUNA Example
Shorting LUNA can be a very profitable way to train, but you must also recognize that it moves in micro-movements. In other words, you can only trade it for short-term moves, acknowledging that it could eventually go to zero.
With this in mind, an example might be that it rallies 5%. You can short the market at this point, knowing it has consistently given up rallies over the longer term. That said, we are at such low levels that it’s challenging to get into a longer-term “short it and forget it” trade. 5% moves are straightforward at these deficient levels and should be considered potential opportunities.
What Are the Advantages and Disadvantages of Shorting LUNA?
There are, of course, both advantages and disadvantages to shorting LUNA. That being said, traders need to be aware of both the pros and cons of doing so.
Advantages of shorting LUNA
- Ability to make money in a bear market – By shorting LUNA, you can make money in a bear market when other traders are losing money.
- You are no longer stuck with a “HODL” methodology – By using the CFD market, you can easily short a market that will fall. It also allows for hedging other positions that you may already have.
- Altcoin – LUNA is in altcoin. They tend to have very long cycles, meaning they will be either very bullish or bearish for long periods.
Disadvantages of shorting LUNA
- Theoretically unlimited losses – Although not a problem at PrimeXBT and the CFD market that it offers, if you are shorting the perpetual contract in the futures exchange, you could theoretically lose an unlimited amount.
- Bear market bounces – You should know that the occasional bounce can be pretty vicious in a bear market. Money management is crucial when you are short an asset.
Why You Should Short LUNA With PrimeXBT
If you choose to short LUNA, you would be hard-pressed to find a better environment than the one you see at PrimeXBT. Some of the significant advantages will include:
- CFD market – You will not have to go out and “borrow tokens” to start shorting. It’s a simple trade that is done with the click of a button. After all, you are not looking to do anything other than profit, so the simplicity in and of itself makes the process attractive.
- No liquidity concerns – The CFD market does not have to worry about liquidity similarly. After all, you do not have to have someone willing to loan LUNA you; the trade is already set up; it’s just a matter of you pressing the “sell” button.
- World-class platform – The platform at PrimeXBT is world-class and available online. This means you can trade from anywhere you have an Internet connection, allowing for opportunities whenever they occur. Furthermore, the platform has a whole suite of charting tools to do complex technical analysis.
- Go beyond LUNA – With PrimeXBT, you can trade several assets, not just LUNA. You can trade currencies, indices, commodities, and crypto.
Shorting LUNA is a great way to earn on your crypto portfolio because it allows you to make money in a down market and an upmarket. Furthermore, you need to remember that LUNA has already blown up once before, so it certainly has a lot to prove. This means that you are more likely to see skepticism than optimism.
You need to be cautious about how you do it because the occasional “bear market bounce” can be pretty vicious. This is true in all markets, but a small market like crypto means that it can be much more significant than in other places like the stock market. Position sizing and money management will be crucial, but the reality is that you should be able to make money in both an upmarket and a downmarket.
You can also use the CFD platform to hedge an existing LUNA position if you have one. This helps mitigate some of the losses that you may have in your holdings. By using the PrimeXBT platform, you can do all of the technical analysis needed to make educated decisions. Using the CFD market, you can get in and out of the market quite easily and quickly. Long gone are the days of simply “HODLing” crypto, so learning how to short will be crucial.
Can you short LUNA coin?
Yes. You can short LUNA through a perpetual futures contract or the CFD market like the one offered at PrimeXBT.
Which hedge fund shorted LUNA?
The South Korean startup Uprise lost $20 million in client funds by shorting LUNA during its price collapse, getting caught in massive bounces. This was due to an over-leveraging of the position size.
The fact that they lost so much money simply shows just how dangerous shorting a collapsing market can be. Nothing happens in a vacuum, and they were caught in what is known as a “bear market bounce.” Luckily, retail traders can be much more nimble than hedge funds.
Did people make money shorting LUNA?
Yes, many people made money shorting LUNA, but just as many lost by trading recklessly. When a market gets out of control, as LUNA did, vicious rallies occur occasionally.
What is the best way to short LUNA?
The best way to short LUNA is through the CFD market because it frees up many complications of borrowing the coin. Furthermore, it’s a simple click of a button for the process to happen.
What’s the best time to short LUNA?
LUNA moves right along with the rest of crypto in general, so if the crypto markets are in a bear market, that’s when you should be looking for short opportunities in LUNA.