I wasn't aware of that. But, due to the design of the network, you can't do naked shorting I would think. So, shorting would mean, borrowing actual shares from someones account and then selling them and promising to buy them back at a later date. I would also think that you would have to cover the sell in cash and would be subject to margin calls as well. I don't know if shorting BTC nor derivatives, could really ever "work" at quite the same was as they do in the stock market. For one, most people don't keep their coins in the exchanges - right there you can't borrow them for sale.
It works on Bitfinex because there's a pool of USD and BTC that's lent on a P2P system in exchange for interest. USD interest is very high and BTC interest is very low.
I guess some investors would do that, but die hard BTC'ers would NEVER EVER allow their coins to be used for such purposes. In the grand scheme of things it is probably quite small at that site and I can only hope it stays that way. Again, due to the nature of the network, you are not going to see naked shorts. And, due to most keeping larger amounts of coins offline, you just won't get the short volume needed to manipulate.
What is a naked short? Bitfinex is a great example, I at least like their concept, because it's actually "from the people, for the people" due to their P2P lending system. There are margin requirements, which by the way, could be one point the CFTC could regulate. (the requirements)
I'm not sure if I like it or not, because our overall goal should be a higher price, but I'm not sure, if my thought process isn't to shortsighted and this is an valid argument at all, because they have to buy back the coins when closing the position..
Anyway, you missed one importent point when it comes to money:
where money can be made, there will always be people who try to exploit that. A current example would be the "true believers", who would never ever sell a Bitcoin, vs. the speculators, who trade the swings and are selling, buying lower etc.
Another thing to think about.. when we trade, we aren't actually transfering Bitcoins on the exchanges, but I assume, all Bitcoins are backed up by real Bitcoins.
I've read that the "real" finance does that at an even greater extent - many CFD (?) brokers simulate shorts etc. within their system, which results in a state, where traders play against the house and not against the market.
Well, I don't like shorting. It is another instrument of manipulation. I know derivatives can help miners, just as how they help farmers in agriculture, but moreso they can be instruments of manipulation. Luckily we are somewhat protected by the "infrastructure"/blockchain of BTC.
Did I miss that point, really? I said a few posts ago that BTC is just an intermediary away from money as we know it. I love what BTC stands for but in the end, not that far from now, I don't see money in it's current form (with or without a central controlling entity) being an answer. When you look at it, clearly money has problems. There is still too much power involved. Something more along the lines of a time based currency, to me, seems like a better solution. But that is alongside, and after, BTC.
When we trade EVERYTHING is in the blockchain. The shorts (which are just sells in this model) are in the blockchain. That is why I said naked shorts can't work. Something to consider with the stock market, A LOT of shares of stock are fake. The stock exchange itself should implement a blockchain model to control counterfeit shares.
