How to Short Bitcoin

9/9/17

At the moment of writing this, bitcoin is $4,251.93/bitcoin and gold is $1,346.70/troy oz. As most people in investing and speculation are aware, bitcoin has had a dramatic run up over several years. It, and other digital coins, are looking quite Tulip and Beanie Baby bubbly.

In investing forums I often read the question "how do I short bitcoin?". This is not investment advice (see lengthy disclaimer below) but here is how I personally am approaching it. My logic (or lack of logic, time will tell) is that from here on out I am "shorting" bitcoin long-term by buying gold, the thing that bitcoin is obviously desperately trying to imitate.

Bitcoin proponents have billed it as "digital gold", "mining", "store of value", "no 3rd party liability", "global currency", "limited supply", etc., all things which apply to gold. But since gold has a lengthy history, these things have been proven for gold, while they have been generally unproven for bitcoin.

Also, with services like Goldmoney.com, one can use a card to transact with the value of their 100% backed stored physical gold, or get their physical gold delivered.

The original bitcoin paper the anonymous "Satoshi Nakamoto" person/group wrote is certainly interesting, but totally theoretical. It ignores the harsh realities and frictions of governments, regulation, taxes, hacking, exchanges, forking, 1,000+ competing digital coins, extreme variability, etc., that constantly plague bitcoin. Yet the first line of the paper pretends it is stable and secure by calling it "cash". In theory, yes.

It is a shame that bitcoin was created to solve a problem that didn't really exist in the first place. The vast majority of US dollars, for example, are already electronic with cryptography used to secure transactions. Banks provide (however small) interest and fraud protection and credit card companies have cash back programs and fraud protection. Banks and companies seem to be side-stepping specific digital coins and simply using their own permissioned versions of blockchain technology as more efficient ledgers. Smart people have thought about money issues for years and gold was decided as the solution through accumulated experience. I have a chunk of gold somewhere...let's see it get hacked or go to $0/troy oz or not desired anywhere please.

Thanks for reading.