Yeah what you're describing is a well known phenomenon in financial markets called counterparty risk[1]. Those betting against the subprime mortgage bubble prio

Yeah what you're describing is a well known phenomenon in financial markets called counterparty risk[1]. Those betting against the subprime mortgage bubble prior to 2007 for example feared that those institutions accepting their exotic CDS bets would actually go out of business when the subprime bubble popped[2], and the bets wouldn't be realised. It's a sign of immaturity of the bitcoin economy that there's no trustworthy effective bitcoin shorting options- even if you don't wish to speculate, but because you wish to hedge your exposure to bitcoin volatility (say you're a large ecommerce player, with significant bitcoin holdings- you're effectively long bitcoin - and you don't want those holdings to halve in value overnight). [1] http://www.investopedia.com/terms/c/counterpartyrisk.asp http://www.investopedia.com/terms/c/counterpartyrisk.asp [2] http://www.amazon.com/The-Big-Short-Doomsday-Machine/dp/0393338827 http://www.amazon.com/The-Big-Short-Doomsday-Machine/dp/0393...