2011/6/18 Mike Frank <[email protected]> > Shorting essentially just means borrowing the item to short, and then > selling the borrowed item below market price.
Why would you sell it below market price? You sell it at the market's bid price. > > You could certainly borrow bitcoins from someone (if they were willing to > loan them to you), and then sell the borrowed coins on an exchange. > > However, the existing exchanges don't support "naked short selling," which > would means posting an "ask" to sell bitcoins that you don't actually have > on deposit in your exchange account. > > But, there is nothing to prevent someone from making such an exchange, or > just posting a Craigslist ad that says, "I have 1 million Bitcoins which I > am willing to sell to anyone for $0.001 cents each," when you don't have the > actual coins yet, just some friends who have agreed to loan you their coins. > > That would essentially be a retro-tech equivalent of a naked short sell. > > Yes. And whoever it was would demand their bitcoins back if the value ever went over the capital they knew I had. And then I'd be wiped out, even if I was later proven right at the end of the two year time period. Which is the reason I don't do this; I'm not willing to put an upper bound on people's gullibility. I correctly called the tech crash (instead of selling out my tech stocks, I endowed a preschool scholarship with them) and the US real estate crash (I invested in non-US mutual funds, which turned out to be stupid, but oh well). Neither of these took brilliance to see coming, and the bitcoin crash doesn't either. But I couldn't short either of them safely, and I can't short bitcoin safely.
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