What is the Difference between shorting BitUSD and buying BTS on BitShares?

The BitShares platform offers a unique decentralized exchange (DEX) that allows users to trade various assets, including BitUSD and BTS. Understanding the difference between shorting BitUSD and buying BTS is crucial for navigating this platform effectively. Here’s a breakdown of each concept:

Shorting BitUSD

What is BitUSD?

• BitUSD is a stablecoin on the BitShares platform, pegged to the value of the US dollar. It is a type of “smartcoin” that maintains its value through collateral backing in BTS (BitShares) tokens.

What Does Shorting Mean?

• Shorting involves borrowing an asset and selling it with the expectation that its price will decrease, allowing you to buy it back at a lower price for a profit.

How to Short BitUSD

• On the BitShares platform, shorting BitUSD involves creating a collateralized debt position. You borrow BitUSD by locking up BTS as collateral.
• If you believe the value of BTS will rise relative to USD, you might short BitUSD by borrowing it and selling it for BTS. This way, you can potentially profit if BTS appreciates against USD.

Risks

• The primary risk is that if the value of BTS falls significantly, your collateral may be insufficient to cover the borrowed BitUSD, leading to liquidation of your position.

Buying BTS

What is BTS?

• BTS is the native utility token of the BitShares platform. It is used for transaction fees, governance, and as collateral for smartcoins like BitUSD.

How to Buy BTS

• Buying BTS involves purchasing these tokens directly on the BitShares DEX or other cryptocurrency exchanges where BTS is listed.
• You can use various cryptocurrencies or fiat-pegged stablecoins like BitUSD to buy BTS.

Purpose

• Buying BTS is typically done if you believe in the long-term growth potential of the BitShares platform or expect an increase in the value of BTS itself.
• Holding BTS also allows participation in network governance and staking opportunities.

Key Differences

1. Objective:
   • Shorting BitUSD is typically done with a focus on profiting from price changes between USD and BTS.
   • Buying BTS aims at capitalizing on potential appreciation of the token or participating in network activities.
2. Mechanism:
   • Shorting involves creating a debt position backed by collateral.
   • Buying involves direct acquisition of tokens without leverage or debt.
3. Risk Profile:
   • Shorting carries risks related to price volatility and potential liquidation.
   • Buying carries market risk but does not involve leverage-related risks.

Understanding these differences can help you make informed decisions based on your investment strategy and risk tolerance on the BitShares platform.