Stephen Gandel at CNN Finance:
Can you bet on the likely eventual bitcoin crash?
You bet. But it’s an expensive trade. And even if you’re right, you won’t walk away with much, if anything.
The traditional way you bet against something is to “short it.” But in order to do a short sale you have to borrow a share of stock or bond or whatever you are looking to bet against. And borrowing bitcoins is nearly impossible.
I think this is an interesting idea I hadn’t heard before; why is Bitcoin’s growth heading straight up? Well, unlike a regular financial market, it lacks the ability for people to get a windfall from anything other than growth. There’s no profit to be made in betting against it.
Update: Friend of the site Mat Peterson linked me to this fascinating paper on market volatility (warning – PDF): Regulatory Medicine Against Financial Market Instability: What Helps And What Hurts? It digs into the potential what-if? scenarios that accompany a variety of financial regulation measures, including a ban on short selling. One for the finance nerds.