I'm still confused as to how the fact that you can short the Bitfinex TH1 mining contract adds value to it. So this is the explanation I've developed.
In an extreme case, say you have an asset worth $1 today that will produce zero income and be worth $0 tomorrow. You clearly paid too much for this asset. However, you can lend it out to shorters. If there is a limited supply of the asset, a shorter will pay you very close to $1 (or a 100% swap rate) to borrow it and return it tomorrow.
So the contract holder pays a premium for an asset - has the money sit around earning a zero return, and then gets almost all of their money back. The shorter makes a very tiny profit (say 10% APR). Both of them have expected zero return rates that will vary in actuality based on mining difficulty. However after fees (notably the 15% of the swap rate) the expected return rate is negative.
According to this logic - so long as TH1 owners are willing to earn an average zero return rate (speculating that mining difficulty won't increase at the same rate it did previously) - the only thing Bitfinex can do to bring TH1 prices down to their mining return is to issue more shares. This is in fact what they did early on and caused a 40% price drop.
It is possible that over time, TH1 owners will realize that their return rate is low and this will reduce demand and the price.
