Going Long (buying low and selling high) is generally permissible.
But Shorting (selling first and buying back later at a lower price) is considered impermissible because of the possession issue.
However, for a pair of Cryptos, where you own both coins/tokens, can you short (because you are in effect buying the other one with the other coin)?
EG. BTC/USD.
I own both BTC and USD in my account.
If I short this pair, I would be selling BTC and Buying USD. So I would effectively buy USD with the BTC I have in my account.
Any issues with this?
JH
Wa alaykum salaam,
Is there any lending agreement? or are you simply carrying out trades independently without any broker requiring you to return the crypto you purchased?
Also, are there any fees attached to shorting in this instance?
I would be trading myself independently on the exchange such as Binance.
So if I sold BTC and purchased USD (because I have both), then I don’t need to buy back BTC at a lower price if I didn’t want to. However, the likely purpose would be to short and then buy back later at a lower price (i.e longing the other coin lower and selling higher).
There is no leverage. It’s just exchange fees for every transaction, whether you buy or sell first. It’s their fees for matching you up with another buyer/seller.
JH
I don’t know why you call this shorting when this seems to be a regular sale. Shorting has a specific connotation wherein you generally borrow something and then sell it and you have to pay interest or other fees for the borrowing until you close the short by buying back and then repaying the lender
If you are just selling your btc hoping to buy back later at a cheaper price, can’t see anything wrong with that as that is what you would generally want to do
Let Mufti Saab give the final verdict though
An additional question would be, do you have to have possession of the opposite coin/token before shorting? Or can you simply sell and buy back later?
JH
Why you not just sell rather than go short? Perhaps you’ve got an account on 2 different platforms and you want to short on one of them while possessing BTC on the other?
In any case, if your BTC balance doesn’t diminish because of this short transaction then that would mean you’re selling BTC that you don’t own, right? And therefore impermissible?
Mufti sahab should be able to clarify
What’s your verdict MF?
JH
Yes, I was wondering the same as @ia_nasir
If you are selling high and buying low, it’s not the technical shorting in the markets.
You would have to adhere to the shariah rules of sales nevertheless such as taking ownership etc.
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