[habosa]

Is there any exchange where I can short sell bitcoins? Besides the fact that this will almost definitely be a profitable strategy in the near future, it would seem that allowing both short and long positions would create market stability. Most securities exchanges allow both short and long positions.

[JoshTriplett]

If you really want to bet on BTC going down, you might consider a put option, rather than short selling. You can bet that a financial instrument will go down without borrowing money to do so and risking a potentially indefinite loss. You can always let a put option expire, and just lose the fee you paid for it. And right now, you shouldn't have any trouble getting people to accept such a put option, because most people want to bet on BTC going up.

[Permit]

Short selling Bitcoins would be an incredibly risky move on your part. There are no financial regulations in place to prevent market manipulation. You used to be able to short sell on Bitcoinica and there were some really questionable margin calls that took place.

[habosa]

Can you elaborate? I'm not too familiar with the bitcoin market, just viewing it from a normal (amateur) financial perspective.

[jfoutz]

Read up on the hunt brothers and the silver markets. Essentially, they would buy up contracts with brokers to buy 1lb of silver on july 1st for $10 (or whatever the specifics happen to be). Then, in June they bought all the silver, like some ridiculously huge fraction of all the silver in the world. When it comes time for that broker to find that pound of silver he owes the hunt brothers, the hunt brothers get to set the price, because they're the only ones with silver. So this broker, he has to come up with how ever much the Hunt brothers demand, he is really over a barrel.

Just one memorable example of market manipulation and unlimited exposure.

[nikcub]

if you didn't understand what he said then you shouldn't be short selling

[muyuu]

Yes, go ahead:

http://mpex.co/ https://icbit.se/

I want to load some more, so the more you short them the merrier.

[T-hawk]

This comes up on most Bitcoin threads, and you'd think a google search could answer that, but the results are pretty unclear. Apparently Bitcoinica used to but no longer exists. The lack of a direct answer would suggest no, unless someone here chimes in otherwise.

Shorting isn't possible within the Bitcoin protocol itself, since there's no mechanism for the lender to compel the short-seller to cover and return the borrowed bitcoins. And Bitcoins are usually not kept in custody with a broker that could lend them, since doing so would defeat the purpose of the protocol in the first place, that only you can spend your coins. (Any lending or any other means of paying a bitcoin is spending it as far as the protocol is concerned.)

Such an exchange could exist, if it established its own trustworthiness outside of the Bitcoin protocol. It would have power to spend depositors' bitcoins on their behalf, like a bank for fiat currency does, but unlike a bank there is no higher authority such as a government to appeal to if the bank breaches its trust. The exchange would have to do something really really compelling to entice Bitcoin depositors and earn their trust. This set of problems would appear to be deep enough that a Bitcoin short exchange does not currently exist.

[panarky]

I would be happy to lend you bitcoin you can sell (secured with sufficient collateral of course).

[trotsky]

I'm far from a bitcoin bull, but shorting a market that's gained 500% in a few months is suicidal.

[_delirium]

Shorting a market that's recently undergone a significant price spike is actually a quite common strategy, betting that it's a temporary anomaly and will revert to the long-run trend. I have no idea whether it's a good strategy here, but it's hardly unusual. In fact, it's probably the common case: you short-sell things that you think are over-valued, and things that have undergone rapid escalations in price where your analysis doesn't conclude that the fundamentals support it are prime candidates. Lots of people made money shorting $140/barrel oil in 2008, for example; or shorting real-estate in the mid-2000s, which had been on a decade-long upward trajectory just prior to the crash.

[trotsky]

"Markets can remain irrational a lot longer than you and I can remain solvent." - John Maynard Keynes

Two things you're not taking into account: 1) There are no fundamentals in the bitcoin market and 2) Margin calls

Based on the price action of just the last few months, it's easy to imagine you might need to cover for BTC at $250 or more (log trend), yet your max upside would be $50.

[JumpCrisscross]

A pre-requisite for this would be liquid Bitcoin lending, to establish the Bitcoin rates market.

[josephagoss]

Also give https://www.bitfinex.com a go

[eric_bullington]

https://icbit.se/ is a Bitcoin Derivatives Market and Exchange. It's probably got the most liquidity available. I think more and more merchants and miners will use icbit for currency exchange hedges.

[MichaelApproved]

It would be great for the system by creating more liquidity.