Short Selling is now available for sBTC and sETH on Kwenta. Short Selling offers traders a familiar way to convert downward price trends into potential profits.
The addition of Short Selling is also a major milestone for Kwenta as it lays the groundwork for more advanced trading tools currently in development.
On Kwenta, a trader can open a short position by using sUSD as collateral to borrow either sBTC or sETH from the Synthetix debt pool. The borrowed asset is then automatically sold for sUSD. To close a short position, the borrowed asset is repurchased with the sUSD it was initially sold for. If the price of the borrowed asset has decreased, the trader will be able to repurchase the borrowed asset at a lower price, retaining any unused sUSD as profit.
An advantage of shorting on Kwenta is the deployable capital traders retain while a short position is open. The sUSD a trader receives from selling the borrowed sBTC or sETH when opening a short can used at their own discretion.
How to Short on Kwenta
To access Short Selling, connect a wallet and select the Shorting tab on Kwenta.
To open a short position, input the amount of sUSD you would like to use as collateral. This will determine the size of the short you are able to open in sBTC or sETH. The minimum collateralization ratio (C-Ratio) required to open a short on Kwenta is 150%, and the default C-Ratio suggested by the interface is 200%. You'll need to 'Approve' the transaction before submitting it:
Note that on Kwenta, traders are not required to set an expiry date for short positions — shorts can be open indefinitely. Shorts do accrue interest according to the skew for the Synth that was shorted. If there are more longs than shorts on a given Synth, the interest rate will be 0%. However, if there are more shorts than longs on a given Synth, interest will be charged in proportion with the skew.
Once a position is opened, traders can monitor, manage, or close their positions using the lower section of the page.
To manage a position, click the edit icon (to the right of the Profit/Loss column). This will bring you to the Manage Position page where you can top-up or reduce your collateral, increase or decrease the size of your short, or close your position. Please note that you'll need to wait at least an hour before managing your position after you initially open the short.
If your C-Ratio dips below 120%, your position will be at risk of getting partially liquidated, in which your borrowed assets will be sold until you meet the minimum C-Ratio of 120% again. Be aware that partially liquidated positions essentially take a loss on the sold borrowed asset. This can be avoided by topping up the collateral in a position as needed or closing the position before it drops below the minimum collateral requirement.
The synthetixDAO is currently offering SNX incentives for anyone shorting sETH or sBTC, to help reduce the long skew of the global Synthetix debt pool. These can be claimed easily in the shorting interface:
Traders can add leverage to their shorts by using the sUSD attained from opening a short on Kwenta to open another short. This deployment of available capital from open shorts increases the potential gains or losses from a traders short position, thereby adding leverage to the position. Please note that the more leverage used, the greater the risk.
For now, Kwenta users will still be able to use iSynths, which are Synthetic assets that inversely track the price of the asset they represent. iSynths can be bought and sold under the exchange tab and enable users to convert downward price action into potential profits. You can currently trade iBTC, iETH, iDEFI, iXRP, iTRX and many more.
Note that iSynths have their own unique mechanics that should be well understood prior to usage. To learn more about iSynths, visit the Synthetix documentation.
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