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For every fanboy believing that crypto is the future of everything, there’s a wet-blanket naysayer calling it all a scam.

Talk, however, is easy – and it doesn’t make you any money.

If you’re a skeptic who truly believes that crypto is doomed to fail – a Ponzi scheme waiting to collapse – you should be betting against it.

Bill Gates, the Microsoft founder and long-time bitcoin skeptic, said in 2018, “I would short it if there was an easy way to do it.”

Well, we aren’t in 2018 anymore.

Many crypto exchanges, such as Binance, the world’s biggest, allow users to bet against cryptocurrencies in a wide variety of ways, including shorting. Some even offer products that go up, for example, by 30 per cent for every 10 per cent bitcoin falls.

To be sure, no crypto platform registered with Canadian authorities has yet been allowed to offer them. While investors are certainly free to use the unregistered ones, that carries a level of risk that Canadian regulators deem to be too much.

But there’s more than one way to short a bitcoin.

Another way, which is officially sanctioned, is to short any of the crypto exchange-traded funds, such as Purpose Bitcoin ETF BTCC-T from Purpose Investments, or stocks such as Hut 8 Mining Corp. HUT-T

There are many, many such crypto stocks or funds on the market, so much so that they have become effectively commodities – their price actions are so similar that whichever one you choose doesn’t really matter.

Shorting, of course, is complicated. You’re effectively borrowing a financial product to sell at the current price and then actually buying it back at (hopefully) a lower price in the future.

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There’s a trader who’s famously done this successfully: Mark Dow, who shorted bitcoin at the top of its 2017 boom, when it had risen to US$20,000 from US$1,000. From that peak, Mr. Dow, a former International Monetary Fund economist, had shorted bitcoin all the way back down to US$3,500 per unit.

While Mr. Dow hasn’t disclosed how much he’d made, that’s at least an 80-per-cent gain.

For inexperienced investors, though, shorting might seem daunting, and even for experienced ones, it’s full of pitfalls.

There’s an easier way than to short crypto yourself. You can effectively outsource that labour by buying a bitcoin inverse ETF.

In the same way a normal bitcoin ETF tracks the asset’s price, an inverse ETF goes down when the asset goes up, and vice-versa.

Horizons ETFs Management (Canada) Inc.’s BetaPro Inverse Bitcoin ETF BITI-T launched last year on the Toronto Stock Exchange. There’s also ProShares’ Short Bitcoin Strategy ETF BITI-A on the New York Stock Exchange, launched this year. (Note that these two funds, while by different companies, have the same ticker of BITI.)

How much you would have gained by buying one of these is roughly the same as how much you would have lost if you had bought bitcoin: year-to-date about 33 per cent.

A warning to keep in mind is that betting against something is a dangerous game. Theoretically, the potential losses are much greater than just betting on an asset.

As depicted in Michael Lewis’s The Big Short, a group of investors had bet against the U.S. housing market and profited hugely from the 2008 financial crisis. But only in retrospect do we call these risk-takers wise.

One of those investors, Michael Burry, was literally laughed out of rooms when he had tried to find ways to short the housing market. The same man pondered shorting bitcoin last year when it was at US$60,000. He didn’t follow through.

I’ve asked Mr. Gates whether he is indeed shorting bitcoin now, given that it’s become easier to do so than in 2018, and he’s still an avowed skeptic. I haven’t heard back.

Of course, these big-time investors don’t telegraph their moves. Maybe Mr. Burry and Mr. Gates are betting against bitcoin at this very moment, and we’ll hear about it only when the author Mr. Lewis writes The Big Short 2.

Whether you should bet against crypto or not ultimately comes down to this: Are you confident in your stance as a skeptic, that everything will come crashing to zero?

If you’re not willing to bet against crypto, then perhaps your belief isn’t so ironclad.

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