this is gonna be great.
the shorts are mostly punks who have no idea how much pain Bitcoin can inflict on the upswing. orders of magnitude type pain.
This thought has crossed my mind more than few times. In the early days of commodity derivative trading there used to be these long periods of flat pricing and then sudden discontinuous events, particularly spot electricity and precious metals. All these massive losses (Enron, LTCM) were be papered over by CB's pumping enough fiat to slosh around and the actual deliverable good had long enough lag time delay on expected delivery.
Bitcoin is the first digital commodity where immediate delivery is not only expected but immediate fail-to-deliver is a loud market signal of an insolvent counterparty. Futures and derivative markets in a digital commodity available for immediate delivery seem foolhardy, but the massive speculative mania that has engulfed financial markets for the last 30 years on the back of easy fiat money has given rise to any number of hare-brained speculative secondary markets. Bitcoin derivatives could turn out to be the final denouement for the speculative manias, almost like the fiat speculators graveyard.
The proof-of-solvency measures being rolled out by bitcoin counterparties are an interesting phenomena all in themselves.
those exchanges that offer derivatives trading, especially shorting BTC, need to be watched like a hawk.
there should be no cash settlements allowed to take the place of lost BTC. this would be how naked shorting and market manipulation would occur.
proof of solvency and reserves should be demanded by the community to root out any shenanigans.
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