It’s not going to work because market caps in crypto are universally fake.
If I own ~100% of a shit token the market price doesn’t really exist - market cap could be in the trillions, all it takes is some wash trading.
Some fool is likely to tag along and buy some for a ridiculous price.
If a token is lost it shouldn’t be counted in the market cap - yet it is. If you knew that only 1BTC is movable - all other coins provably lost - would you short BTC at $1 billion?
It’s even worse because the true supply is impossible to know and can only be estimated.
I would argue that shorting is not a cause but a result of liquidity - liquid markets make shorting possible which is why efficient markets are easier to short.
Shorting illiquid/manipulated tokens would only make price manipulation more profitable by forcing liquidations via a short squezze.
What could help in general is making markets more liquid, but that’s only possible to solve if illiquidity is caused by regulatory and technical barriers.
as having observed in 1977 that efficiency requires short sales, and either Shiller or Miller observes that houses can’t be shorted.
That’s not true, a nonrecourse debt that uses house as collateral is a form of shorting.