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. There is a company based in Hong Kong in testing phase that seems to offer bitcoin shorting, but I couldn't find out much about it.
What you can buy is a derivative contract that will rise in value when bitcoins fall in price. There are a number of places that sell options and futures on bitcoins.
One place -- ICBIT, a bitcoin exchange -- is run by a guy in Moscow.
MPEx, a stock exchange for companies with shares traded in bitcoins -- there are four of them -- also lists bitcoin options.
BitInstant, a Brooklyn-based payment processor, is planning on launching a bitcoin futures exchange early next year.
All of these places require that you open an account to start trading, and none of them take dollars. So you have to buy some bitcoins elsewhere, which in itself is no easy task, and transfer them to your ICBIT or MPEx account before you can get started.
MPEx charges 30 bitcoins to open an account, which at Wednesday's closing price was $33,000.
I heard good things about ICBIT, which offered accounts for free but charges a commission when you trade. But to see the prices of the contracts, you had to get your account up and running and deposit a minimum of 0.1 bitcoins. (You can buy bitcoins in fractions.)
I decided to check out Coinbr, a brokerage firm that allows you to trade options on MPEx without opening an account there. You still have to deposit 0.1 bitcoin in a Coinbr account to get started. But MPEx allows anyone to see the prices of its contracts, so you know what you are getting into before you start.
Here we go: If you are betting against bitcoins, what you want to do is buy a put option, which is a derivative contract that allows you to sell something at a set price. If the actual price of the thing falls below the set price, or strike price, you make money.
You could also sell a call option, the right to buy at a set price, but that is riskier and requires collateral. So I stuck to looking at put contracts.