Shorting Bitcoin can lead to the complete loss of a trader’s invested capital.

The complete loss of a trader’s total invested capital, specifically as a result of shorting Bitcoin.

What Is Ashdraking?

The term “ashdraking” was coined following the activities of Lord Ashdrake — a pseudonymous Romanian Bitcoin trader who was prominent in the mid-2010s. 

Ashdrake was a high-profile crypto skeptic. He determinedly had a strategy of shorting BTC — that is, betting that the digital asset would decline in value. 

He enjoyed significant success between 2014 and 2015, a period of precipitous losses in which Bitcoin lost nearly half its value, and he became a prominent voice encouraging traders to adopt short positions.When Bitcoin broke $300, Lord Ashdrake again shorted the currency — but this time the market was not in his favor. 

Prices rose rapidly, breaking $500 and nearly touching $600 — just a few weeks after the $300 milestone. Ashdrake continued to exclusively hold an aggressively short position, which ultimately caused him to lose his entire invested capital.Ashdraking remains a concern for traders. In 2017, the Chicago Board Options Exchange (CBOE) became the first major exchange to offer traders an opportunity to trade Bitcoin futures — that is, to place bets on the price of Bitcoin without having to actually hold any crypto themselves. 

The CBOE launch was considered a key test for Bitcoin, and the generally crypto-skeptic mainstream financial press strongly predicted that institutional investors would take large short positions en masse. 

This did not happen, with the futures posting huge rises within just a few hours. This caused some prominent brokers to completely forbid their clients from taking short positions because of a fear that they too would be “Ashdraked.”Lord Ashdrake (or someone claiming to be him) remains a prominent voice in the crypto community. In October 2020, he gave an interview to blogger zoomerjd, in which he talked extensively about the notorious incident.