Scott Nations, the president and chief investment officer of NationsShares, a division of Fortress Trading, shorted Bitcoin through the Cboe futures market live on CNBC on September 26. Since then, the price of Bitcoin has slightly increased to $6,500.

“I want to be a seller of the October contract. The Cboe Bitcoin futures, that is a single Bitcoin in a futures contract. My targeted downside is $5,950 and my stop to the upside is $6,600. Why do I want to short? Because it is Bitcoin. It has no fundamental value. We’re in an unravelling of this collosal bubble and the only thing going for it is hope, and hope is a horrible strategy,” Scott said.

Since Scott shorted Bitcoin at $6,370, the price of BTC has increased by 2 percent, demonstrating stability in the mid-$6,500 region.

Why Short Contract Holders are Losing out

Holders of short contracts of Bitcoin and other major cryptocurrencies like Ethereum and Ripple have lost out massively over the past week, especially as XRP, the native cryptocurrency of Ripple, recorded a three-fold increase in value and ETH, the base currency of the Ethereum network, demonstrated decent gains throughout the same period.

It is difficult for short contract holders to bet against the cryptocurrency market at the current phase of the correction because as billionaire investor Mike Novogratz said, the market is in a bottoming out process wherein it has started to demonstrate seller fatigue.

Novogratz emphasized that once Bitcoin surpasses major resistance levels at $6,800, $8,800, and $10,000, the cryptocurrency market may also start to see actual demand from institutional investors that could drive up the price of Bitcoin by more than 30 percent by the end of the year.

No Fundamental Value Argument has no Merit

The argument of Nations that the price of BTC will decline by 3 percent in the short-term because it has no fundamental value and that it will eventually hit zero has no merit, because if that is the case, Nations should not even be attempting to short the market in a short-term downtrend.

As demonstrated by Iran, Turkey, and Venezuela in the past nine months, it has become difficult to argue that fiat currencies have fundamental value as well, as their value depend on the economy they are based in and if the economy fails, it has no support.

Over the past few months, the national currencies of Iran and Venezuela have declined so massively in a short period of time that it has been unable to operate as currencies. Citizens and residents in the two countries have found it difficult to purchase basic necessities and food with their national currencies.

The fundamental value of Bitcoin comes from its ability to operate as a consensus currency. The market, based on a simple concept of supply and demand, measures the value of BTC in real-time. In the months to come, especially as the crypto market continues its gradual recovery, the relevance of Bitcoin as an alternative currency to fiat money will likely increase in struggling economies.

Featured image from Shutterstock.

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