[Cryptography] Cryptocurrency: CME Approved, Coin Paychecks, FED, OpenBazaar ZEC BCH

[John Levine]

In article <E1eLXkZ-000En5-IF at elasmtp-masked.atl.sa.earthlink.net>,
Henry Baker  <hbaker1 at pipeline.com> wrote:
>That's an interesting question.
>
>Yes, Bitcoin futures will be traded, so you could "short" those, but wouldn't it be simpler, and more in line
>with the general philosophy of cryptocurrencies, to simply allow *negative* balances, so "shorting" would
>already be built into the cryptocurrency blockchain?

But that's not how shorting works.  If I short 100 shares of IBM,
first I (or more likely my broker) have to borrow those shares from
someone else so I can sell them.  Then when I cover the short, the
shares I bought to cover go back to the person I borrowed them from.

If you're shorting bitcoin ETFs, you'll be borrowing them, too.  Your
broker will require you have enough actual money in your account to
cover your losses if the short turns against you ("margin"), and if
your short goes beyond your margin, they'll make a margin call where
you either deposit more money or they close out your position at a
loss.  Short futures don't have to be borrowed but they have if
anything stricter margin requirements.

"Naked" shorting, where you don't actually have the shares you're
selling, is in most cases illegal for reasons that should be obvious
if you think about it for a moment.  If naked shorting were allowed, I
could flood the market with fake shares, then when people predictably
panic and the price crashes, buy them back and keep the difference.
Or if people resist panic and hold my fake shares, what happens when
the next dividend is declared and the company says to the buyer "who
are you?"

The SEC has extensive rules about short selling, most based on painful
experience as far back as the 1920s:

https://www.sec.gov/investor/pubs/regsho.htm

Perhaps the message here is that people who know nothing about markets
should not try to manage them.

R's,
John

PS: If it were me, I'd just buy put options.  Good luck putting them
on the bitcoin blockchain.