MicroStrategy’s Bold Bitcoin Bet Pays Off as Short Sellers Face $2B Loss

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MicroStrategy, famous for its bold Bitcoin (BTC) approach, has experienced a significant increase in stock value in recent months due to Bitcoin reaching a new record high price last month. Yet, some investors are wagering that the stock is overpriced and will drop in value in the near future.

Based on Reuters’ report released on Wednesday, S3 Partners, a notable financial data provider in the US, disclosed that short sellers suffered a collective loss of approximately $1.92 billion against the business intelligence company by March 2024.

“Bitcoin has surged over 7% in late trading and nearly 12% since its recent three-day low, causing crypto stock short sellers to rack up approximately $1.92 billion in losses this year,” according to S3 Partners’ assessment.

MicroStrategy and Coinbase Lead the Way

MicroStrategy’s stock, MSTR, outperformed Bitcoin itself this year with a remarkable increase of 180%, as announced by the company. Consequently, those who wagered against the business intelligence firm have suffered significant losses.

Just like Coinbase, a major player in the cryptocurrency exchange market, has drawn scrutiny from investors lately due to doubts about its current market value.

Investors who had placed bets against the US stock exchange that held its IPO in April 2021 experienced a setback, resulting in a loss of $593.50 for them this year.

S3 Partners revealed that the value of bets against digital asset company stocks amounted to $10.7 billion. Approximately $9.02 billion was linked to MicroStrategy (MSTR) and Coinbase (COIN).

Companies specializing in Bitcoin mining, such as CleanSpark, also experienced substantial losses. Consequently, short investors who betted against CleanSpark’s stock (CLSK.O) suffered a loss of approximately $106.4 million based on S3 Partners’ figures.

Crypto Shortellers Overtake Traditional Stocks

Despite the recent surge in the crypto market, a large number of investors have expressed pessimistic views towards these stocks by holding short positions, as indicated by their substantial short interest.

The data from S3 Partners reveals that the percentage of shares available for short selling in the digital asset sector is more than triple the typical 5.13% rate found in the US stock market.

The firm indicated that heavy short positioning among investors implies their belief that these stocks are overpriced and ripe for a decline. Yet, this situation could lead to a short squeeze, causing short sellers to repurchase shares at a higher cost, thereby boosting the stock prices even more.

Short sellers should keep in mind that this trading strategy involves risks, and they could face substantial losses if the stock price unexpectedly increases rather than decreases.

Currently, MicroStrategy owns a grand total of 214,246 Bitcoins, which they bought for an average price of $33,706 each. This substantial crypto holding translates to a value of approximately $6.91 billion. Noteworthy is that MicroStrategy, the largest corporate Bitcoin owner to date, has expressed its intent to expand this portfolio further by acquiring even more Bitcoins. To finance these purchases, the business intelligence firm offloaded some convertible debt.

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2024-04-10 20:42