There seems to be some confusion in the sources I found online about shorting BitShares on the BitShares decentralized exchange.
Let me repeat upfront what I stated in the title. It is not possible. I'll explain why.
Basically, you can't borrow BTS. Only BitUSD (or another Bit Asset).
BitUSD is an asset, but it is one that is pegged to the US dollar. That means that no matter what BTS (BitShares) does on the market, 1 BitUSD will be worth 1 US dollar.
Edited: You can't short BTS by borrowing and opening a margin position. You can buy BitUSD when BTS is high and sell it for more BTS after it drops.
But If BTS Goes Down & The Dollar Stays The Same, Isn't That BitUSD Worth More BTS?
Now that's the question, but here's the thing. Your 1 BitUSD is still only worth 1 USD.
If you borrow BitUSD, you can use it to buy more BTS (or any other asset).
But don't think of BitUSD as an actual fiat dollar. The amount of BTS it takes to make 1 BitUSD is in constant fluctuation. It is part of the formula that keeps BitUSD pegged at one dollar.
I Borrowed BitUSD Hoping To Short BTS
To borrow BitUSD, I had to use my own BTS as collateral. Lucky I backed the loan by 3.4 times the amount I borrowed. I'm also lucky BTS didn't freefall in the time I took to figure it out.
You see, the amount of BTS you use to back a loan decides the call margin.
The more BTS you use as collateral, the lower your call margin. It is also possible to add BTS collateral to a loan if it is approaching the call margin. This will lock up more of your BTS, but it will lower your call margin even more.
If the price of BTS falls and hits your call margin, it will force sell your collateral into BitUSD and repay the loan. You can lose big.
Either Close The Loan Or Buy BTS!
Understanding that my BitUSD wasn't going to turn into more BTS, I had a few decisions to make.
I could have guessed that the correction was over and used the BitUSD to buy BTS or another asset. This is shorting BitUSD.
If I bought BTS with borrowed BitUSD and BTS went up in price, I could use the BTS to buy back BitUSD and repay the loan.
And if BTS went up, I didn't have to use as much to repay the loan. I bought BitUSD with the inflated BTS to repay the loan, and there would be BTS left over. That would be my profit.
Another option I could have pursued would be to buy an asset other than BTS with the borrowed BitUSD. Whatever the asset is, if it goes up in comparison to BitUSD, it can be shorted.
You just let it go up in price after you buy it, then use its inflated value to pay back your loan. Keeping what is left over, of course.
Uh oh. If I believe that all the assets will fall along with the Bitcoin correction, am I in trouble? Only if BTS drops to that call margin.
I can always create a new loan later, so I decided to close my position. Because I never used any of the BitUSD I borrowed, I just payed back the loan. Interest free to boot! I lost nothing!
If I had used some of the borrowed BitUSD, I could still pay back the loan. I would have had to buy more BitUSD to make up the difference.
Hope This Clear Things Up
The only place I really see it confirm that BTS cannot be shorted, is on the BitShares Forum.
There is also a sub-Reddit thread where someone posed the question. One answer seemed to suggest you could short BTS, but was deleted.
I Will Be Shorting BitUSD After The Correction
There is always some risk, but after a deep correction is a good time to short sell.
I highly encourage any new Steem members to start investigating BitShares. Start by turning some Steem or SBD into BTS. Blocktrades.us is a strong platform to make those exchanges.
That's what I did. I just started accumulating BTS when the market looked down.
I'm still learning about the incredible features of the BitShares decentralized exchange. Feel free to add any insights if you have them. I'll post more about BTS as I figure it out myself. :)
@zord189