Bitcoin lacks fungibility, that is a major issue with it as a currency. Why do you think that things like colored coins can exist? The blockchain is public and all transactions are public. Inside an exchange many off the block transactions are done for speed and other reasons but that isn't the same as being "entirely fungible". Besides fungibiltiy doesn't have anything to do with short selling.
Your coins inside an exchange are entirely fungible. If you withdraw coins do you really think you get the same coins back. 
Bitcoins as a currency are fungible.Why do you think there was such a big issue with the recent USA tax interpretation, that indicated Bitcoins were to be treated as property?
Because this made them non-fungible for tax purposes.
Fungibility has everything to do with short selling, because you don't buy back the exact same coins or stocks or metal that you sell. You don't get the same dollar out of the bank that you deposit.
I'm going to put you on ignore friend, as this is becoming a waste of time.