I wonder if this was a big part of why coinbase decided not to support BCH initially.
This really is an interesting situation. In the hours approaching the BCH fork an absolutely massive number of short positions were opened on various bitcoin exchanges, but the price remained steady. I assumed people were shorting in expectation of a crash, but the outlined scenario makes much more sense.
Similarly to the trade outlined in the article, if you already held bitcoin, you could short the equivalent amount and you would still receive bitcoin cash. This trade also had the nice side effect of your exposure to fiat currency staying flat through all the potential fluctuation.
Anyone who borrowed BTC may have implicitly borrowed BCH. Suppose Person A owns shares in OldCo. Person B borrows those shares and sells them short to Person C. OldCo spins out NewCo. On Thursday evening, you go to bed with 1 OldCo share in your account; Friday morning, you wake up with 1 OldCo share and 1 NewCo share.
Bought Person A and Person C own OldCo shares, and so expect to receive one NewCo share. The company provides one. Who provides the other? The short seller. Presumably by buying Person A's NewCo shares. Same thing happens with dividends.
So if you borrowed BTC pre-fork and returned it post-fork, you're may find yourself owing BCH. Shorting is complicated, which is why I'm bemused by its proliferation around a blockchain that doesn't even natively support lending or interest rates.
This really is an interesting situation. In the hours approaching the BCH fork an absolutely massive number of short positions were opened on various bitcoin exchanges, but the price remained steady. I assumed people were shorting in expectation of a crash, but the outlined scenario makes much more sense.
Similarly to the trade outlined in the article, if you already held bitcoin, you could short the equivalent amount and you would still receive bitcoin cash. This trade also had the nice side effect of your exposure to fiat currency staying flat through all the potential fluctuation.