Refusing to admit defeat! The bears are smashing billions in bets to end the crypto frenzy, but MicroStrategy is increasingly being shorted

Zhitong
2024.03.27 01:10
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Short sellers are still betting that the rise in cryptocurrency-related stocks will come to an end, with the total short position increasing to nearly $11 billion, with 80% of the short positions targeting MicroStrategy and Coinbase. The short sellers' paper losses have risen to nearly $6 billion, but they are still doubling down. Traders have put in $974 million betting on MicroStrategy's stock price to fall. MicroStrategy is currently one of the most heavily shorted stocks in the U.S. market. According to S3's report, if the short sellers are wrong about their bets on cryptocurrency-related stocks, they may face more pain

According to the Zhitong Finance and Economics APP, the short sellers are still heavily betting that the rise in cryptocurrency-related stocks driven by Bitcoin will eventually come to an end. According to a report by S3 Partners LLC on Monday, the total short position of cryptocurrency stocks this year has increased to nearly $11 billion. Over 80% of the short positions are targeted at MicroStrategy (MSTR.US) and Coinbase (COIN.US).

The unrealized losses of the short sellers have risen to nearly $6 billion, as Bitcoin has surged by over 65% so far this year, boosting related cryptocurrency assets. Nevertheless, the short sellers are doubling down.

S3's Managing Director of Predictive Analytics, Ihor Dusaniwsky, stated in the report: "Cryptocurrency stock short sellers have been selling off in a rebounding market - either looking for a pullback in Bitcoin's rise or using short positions to hedge actual Bitcoin holdings."

In the past 30 days, traders shorting cryptocurrency-related stocks have increased their positions, especially as MicroStrategy's stock price has climbed. Traders have put in $974 million, betting that this enterprise software manufacturer will fall. According to S3's data, this exceeds the short covering of Coinbase, Marathon Digital (MARA.US), and Hive Digital Technologies stocks during the same period, where contrarian investors repurchased stocks to exit trades.

Short positions in MicroStrategy account for over 20% of its total outstanding shares. MicroStrategy is currently one of the most heavily shorted stocks in the U.S. market, with short interest comparable to large companies like NVIDIA (NVDA.US), Microsoft (MSFT.US), and Apple (AAPL.US).

Of course, if the short sellers' bets on cryptocurrency-related stocks are wrong, they may face more pain.

According to S3's report, given the rebound of MicroStrategy, Coinbase, and CleanSpark (CLSK.US), and the limited number of shares available for shorting, a short squeeze may occur, where short sellers are forced to buy back stocks to exit positions, driving up stock prices and further pressuring other traders.

So far this year, MicroStrategy has risen by nearly 200%, Coinbase and CleanSpark have risen by about 60% and 115% respectively

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