I want to short a cryptocurrency that is highly overvalued. Let say its current value as of now is $10,000 , my intuition say that sometime next year like Feb its going to fall significantly to about $1 (I know that seems crazy) but it can happen.
That's a -99.99% drop in price. Hence increasing my shorting investment by x0.9999 roughly doubling my money.
But if it was a long position from $1 to $10,000 it would be a 999900% increase hence increasing your investement by x9999
Doesn't seem fair right?
But imagine this shorting scenario:
The price moves from $10,000 to $100 , I make 99% in profit. Basically the * same profit as the shorting from $10,000 to $1.
But now I close my position at $100 hence I double my money(let say my inital shorting investment was $1000) so I now have * $2000
I open a short position using $2000 at $100 then the price goes to $1 dollars. That gives me essentially another double up to $4000 That's x3 in profits.
I know the last short has a greater risk of being margin called. But I just used to illustrate that in a way you can bypass the 100% limit . Is there a better way to do this.
I know you can have multipliers(Margin Leverage) but is there a better way?
EDIT: Keith's Explanation is great , I think I understand better the mechanics of shorting, but as explained you would still need alot of margin in your account.
AFAIK there's no broker/exchange that would let you borrow/short a crypto without having some form of security(Most of the time 1:1 collateral) backing it ,leading to the* 100% limit without multipliers.
I think @CQM answer best suits this question, although I may have not explicitly stated it, my main goal is to fully capitalize on a price crash.