Is naked short selling really good?
It will only worsen the volatility of bitcoin.
Assume i would short sell 100 000 bitcoins i dont have at mt gox, the price would crash down to 10$ in a second with an average price of maybe 30$.
Some people would panic and sell their coins and drive the price even more down, i would buy back all coins with profit with an average of maybe 10$ and could also go long at those levels.
No naked shorting......the BTC would be borrowed from a prime lender just as it would be during a normal short position in stock market.
Shorts & derivatives on any real scale are probably things that would require a mature market and only occur when/if there is more liquidity.....at this point we can barely handle long only positions.
Short selling reduces market volatility.
http://whitepapers.stern.nyu.edu/summaries/ch12.html