Key Points
- MicroStrategy’s aggressive Bitcoin strategy has led to a stock price surge, causing short sellers to incur losses.
- Short sellers betting against MicroStrategy and Coinbase have faced significant losses, according to data from S3 Partners.
MicroStrategy’s bold investment strategy in Bitcoin has resulted in a significant increase in its stock price in recent months. This is largely due to the cryptocurrency’s rise to a new all-time high last month. However, some investors are wagering that MicroStrategy’s stock is overvalued and will decline in the future.
According to a report from Reuters, data from S3 Partners, a prominent financial data marketplace in the United States, reveals that short sellers betting against MicroStrategy have accumulated a total loss of $1.92 billion as of March 2024.
MicroStrategy and Coinbase’s Performance
S3 Partners stated, “Bitcoin is up over 7% in late-day trading and up almost 12% since its recent low three days ago, and as a result, crypto-related stock short sellers have incurred -$1.92 billion to their year-to-date mark-to-market losses today.”
MicroStrategy’s MSTR performed even better than Bitcoin itself, skyrocketing 180% year-to-date. This surge has led to significant losses for investors who bet against the business intelligence firm.
Coinbase, one of the world’s largest crypto exchanges, has also attracted significant short-term interest as investors question its valuation. Traders betting against Coinbase, which went public in April 2021, have also incurred a loss of $593.50 this year.
Short interest in digital asset-related stocks has reached a total of $10.7 billion, with MicroStrategy’s MSTR and Coinbase’s COIN accounting for 84% of the total loss. Other crypto firms experiencing significant losses include Bitcoin mining company CleanSpark, with short traders losing $106.40 million.
The Sentiment Surrounding Crypto Stocks
Despite a recent rally in the crypto market, significant short interest in these stocks indicates a bearish sentiment. The short interest % float in the digital asset space is over three times larger than the US average of 5.13%.
This high level of short interest suggests that many investors believe these stocks are overvalued and due for a correction. However, this also implies potential for a short squeeze, where short sellers are forced to buy back shares at a higher price, further driving up the stock price.
Investors are urged to understand the risks associated with short selling, as it can lead to considerable losses if the stock price rises instead of falls.
As of last month, MicroStrategy holds a total of 214,246 Bitcoin, purchased at an average price of $33,706. The company’s crypto holdings are worth $6.91 billion. Despite being the largest corporate entity currently holding Bitcoin, MicroStrategy has expressed its intention to increase its Bitcoin portfolio with additional purchases. The company sold its convertible debt to raise funds to acquire more Bitcoin.
