How to short Bitcoin
Note that this is not financial advice. I'm merely listing the activities I'm considering myself.
Shorting - Any transaction that aims to benefit from the decline of (Bitcoin).
The problem with shorting
In theory, it's possible that the Bitcoin jumps up in value (discontinuously), wiping out everything in your account. So you should only allocate a small portion (<5%) of your capital to this trade. I am however planning to allocate fresh capital to the trade from time to time.
Borrowing Bitcoin and selling it on the spot market
Institutions like Gemini will lend Bitcoin to credit worthy investors for purposes like shorting. This won't appeal to most people as they may not qualify and Gemini will charge interest on the Bitcoin.
Preferred: Shorting on a futures market with stop losses
This has many advantages:
Bitcoin is often in contango. In that case, shorting will be profitable even if Bitcoin remains unchanged.
The exchange runs 24/7, so discontinuities are rare.
Not all the capital needs to be deposited with the exchange. It can be held with a different institution and added as needed. This reduces the effect of a potential collapse of the futures exchange. (Some futures exchanges are very profitable. They are huge intangible assets. In the event of a failure, it makes sense for the owners to recapitalize the business)
Buying the Ftx Bear Token
Ftx manages this passive investment on behalf of the token holders. It may be possible to hold the token long enough to derive a capital gain. It may also be the only choice for investors who do not access to derivatives markets because they can buy it as an ERC20 token.
The token will tend to loose value if Bitcoin trades in a range over several days. This is due to the fund being optimizing the gearing for a consistent decline in Bitcoin. In theory, an investor can adjust the gearing on a daily basis by trading the token.
My conclusion however is that the management fee is too high (10% p.a.).
Shorting related instruments
Tim Bray considered shorting related instruments.