If you think the price of BTC will go up, it's easy to make a profit. You simply buy some BTC for dollars, then sell them back after the price goes up.
If you think the price of BTC will go down, it's not quite so straightforward. But you can make a profit by doing this:
1. Sell BTC for dollars at the current, high price.
2. Borrow BTC from someone else, and deliver those BTC to your buyer.
3. After the price goes down, buy some BTC at the cheaper price and use those BTC to repay the person you borrowed BTC from.
Selling BTC (or stocks) that you don't own, but which you will buy later, is called short selling.
According to the current SEC regs, you have to borrow first, before you can sell. selling first is called 'naked short' selling, which is no longer allowed. You can google/wikipedia for the associated problems with it and why it is no longer legal (in the usa, at least).
Short selling has gained a bad reputation (because short sellers are often people with "inside knowledge" that prices are about to drop), but it does add liquidity to the market, and it tends to push prices towards their "true" value, by making the market price reflect that "inside knowledge".
Inside knowledge doesn't really have any special relationship to short selling. People with inside knowledge of bad news, can short, people with inside knowledge of good news can go long.
But besides that, yes, short selling does add liquidity, and sanity, to the market, by allowing people to trade both on expected gains and expected losses.
Selling BTC? I'm buying. Send a PM and we'll see what we can work out.
just fyi, you could try
http://bitcoin-otc/ for your OTC transactions.
