Why Is It So Hard to Short?
We all have this feeling that it is harder to short than long an asset. I mean, I have a swing trend-following strategy that works well on BTC but only on the long side; when I use it for shorts (exactly the inverse parameters), it doesn't work at all... That's why I asked myself: "Why is it so hard to short??". During the investigation, I understood that, by nature, long and short aren't really symmetric, and the bigger the time frame, the bigger the asymmetry.
1. Drift and risk premium
First, we will talk about the "risk premium". In the equity market, this is easier to understand because there is a risk premium for holding the S&P 500, and of course the longer you hold (in years), the bigger the chance that the S&P 500 goes up during this period. Because of this risk premium in the equity market, shorting is harder because, fundamentally, you go against the trend. That's why the longer you hold your short position, the lower your chance of having a positive trade.
What about BTC? In Bitcoin, I am not sure there is a risk premium for holding it, so this is more delicate. But in the past, Bitcoin went up again and again, so anyway, shorting it was harder because that goes against the global trend.
As we can see, the longer you hold a short position, the bigger the loss (on average, with random trades of course, but that shows that we need a real edge to short, because we go against the trend).
So we see that there is a trend for Bitcoin, but for "shitcoins", which are literally "shit", it would be interesting to see if the trend isn't maybe down?
Here we select LUNA and FTT, two cryptos that got rekt, so shorting them will be easy, right? But the answer is "not really", even if we know that they will crash... In fact, the median says that we benefit if we randomly short them, but on average we lose. It means that there are outlier trades (a few extreme trades) that destroy the performance. That can be explained by the asymmetry between long and short.
2. The asymmetry
And here is the real asymmetry between short and long:
A long can theoretically win infinitely and lose 100%, while a short can only win 100% but lose infinitely.
That's why randomly shorting LUNA doesn't work on average: there is a big risk if the crypto goes up very, very much (and we all know that shitcoins can do a x5 very fast, which corresponds to a loss of 400%), while we can only earn 100% if the crypto goes to 0...
In practice, the loss stops at your margin because you get liquidated, but then you are out of the trade, even if the crypto crashes later.
Start: price 100, capital 100, position size 100 (no leverage).
| Price goes from 100 to | Long return | Short return | Long capital | Short capital |
|---|---|---|---|---|
| 0 | −100% | +100% | 0 | 200 |
| 50 | −50% | +50% | 50 | 150 |
| 150 | +50% | −50% | 150 | 50 |
| 200 | +100% | −100% | 200 | 0 (liquidated) |
| 500 | +400% | −400% | 500 | liquidated before |
3. Cost
In crypto, there is the funding rate. On BTC, it is to the advantage of short traders, but on shitcoins, that's not necessarily the case:
That is one good point for the short, but it doesn't "compensate" for all the other bad ones.
But if you want to short on a spot pair, this is harder, because you have to borrow the coin then sell it, and of course, when you borrow the coin, that's a cost...
| Asset | Annual borrow rate |
|---|---|
| BTC | 0.49% |
| ETH | 2.51% |
| SOL | 5.13% |
| FTT | 10.8% |
| LUNC (the original LUNA) | 0.83% |
| LUNA (the 2022 relaunch) | 41.96% |
| Median crypto on Binance | 42% |
| Highest crypto on Binance | 500% |
| US stock, easy to borrow | 0.25% or less |
| US stock, hard to borrow | above 10% |
| Highest US stock (ARMP, May 2024) | 1000% |
Crypto: Binance margin rates, retail tier (VIP 0), on November 7, 2026.
Stocks: Weitzner, 2023, Daniel, Klos and Rottke, 2025.
Conclusion
We have seen that the fundamentals (risk premium) are to the advantage of long trades, and the longer the trade, the more important the risk premium becomes. Even if the fundamentals are in the direction of the short (with shitcoins), there is a big risk of being liquidated while we short, due to its structure. We have the opposite structure when we long. To limit this effect, it is better to short with a short time horizon.
All these trades were done randomly to show that we need a better edge than long when shorting, because the trend and the structure are against us.
Angolin serves the full BTC history at 1d, 1h and 1m granularity, and the historical universe of each exchange, delisted pairs included, to avoid survivorship bias.
