Interesting point, thanks. I wonder how one would settle a short if the network effectively ceases to exist, or at least ceases to exist as a single, well-defined chain that everybody can agree on. If you short the New York stock exchange, then blow up the building, do you win? :-)

If you short bitcoin-based ETFs on NYSE and Bitcoin subsequently tanks the value of the ETF goes to zero and you walk away with your proceeds from the original sale and with no obligation to give the original ETF back. There is no counter-party risk in a short sale for the seller.

Keynes said "The markets can remain irrational longer than you can remain solvent". Trying to short Bitcoin seems like a great way of becoming more anecdata for this.