First of all shorting can only reduce the price on that platform. Unlike stock markets, actual bitcoins can not be created out of thin air. If you buy cheap shorted bitcoins and can not withdraw them, it is a 'bucket shop'.
Second of all, with shorting you get short squeezes. And unlike the stock market, a bitcoin short squeeze can kill (expose the reality) of a trading platform. While it is POSSIBLE with paper stocks to withdraw the certificates and have them sent to yourself, NOBODY does this. With bitcoin many people actually do withdraw from the trading platform and can expose the lack of real bitcoins behind the scenes.
BRING IT ON!
Here, here. Finally something we agree on (...possibly because I am to some extent abandoning some of my philosophical hopes for Bitcoin...)
In mainstream-land the DTCC and SEC have the backs of 'bitcoinica's in that sphere. People can be sold a handful of nothing because their computer screen tells them that they have shares of stock or whatever.
In Bitcoin-land there is not a big barrier to taking possession of what one has bought, and any outfit that goes out of their way to erect one will be viewed with rightful suspicion. Sure, some outfits will be pulling a Corzine and dipping into seg funds, but as they crash and burn customers will be even more inclined to watch their own backs. Or exit the economy when they have been robbed one to many times.
I'll look forward to some amazing short squeeze actions and will be prepared to (attempt to) capitalize on them. So ya, BRING IT ON!