By
Godfrey Benjamin
April 29th, 2024
MicroStrategy’s MSTR performed even better than the price of BTC itself, soaring 180% year-to-date.
MicroStrategy, known for its aggressive Bitcoin (BTC) strategy, has seen its stock price surge in recent months as the price of the crypto asset rose to a new all-time high last month. However, short sellers are betting that the stock will be overvalued and decline in the future.
According to Reuters’s Wednesday report, citing data from S3 Partners, a prominent financial data marketplace based in the United States, the short sellers who wagered against the business intelligence company have accumulated a total loss of $1.92 billion as of March 2024.
“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,” S3 Partners said.
MicroStrategy and Coinbase Lead the Way
The company said that MicroStrategy’s MSTR performed even better than the price of BTC itself, soaring 180% year-to-date. The surge has caused investors who bet against the business intelligence firm to lose their funds.
Similarly, Coinbase, one of the world’s largest crypto exchanges in the industry, has also attracted significant short-term interest as investors question its valuation.
Traders betting against the US-based exchange, which went public in April 2021, also incurred a loss of $593.50 this year.
S3 Partners disclosed that short interest in digital asset-related stocks 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 which suffered significant losses include BTC mining company CleanSpark. Short traders who wagered against the firm’s stock CLSK.O lost $106.40 million, according to S3 Partners data.
Crypto Shortellers Overtake Traditional Stocks
The significant short interest shows bearish sentiment surrounding these stocks despite the recent rally in the crypto market.
S3 Partners data indicated that the short interest % float in the digital asset space is over three times larger than the US average of 5.13%.
The company said the high level of short interest suggests that investors widely believe these stocks are overvalued and due for a correction. However, it also means that there is 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 advised to be aware of the risks associated with short selling, as it can result in significant losses if the stock price rises instead of falls.
Meanwhile, as of last month, MicroStrategy holds a total of 214,246 BTC, purchased at the average price of $33,706. The company’s crypto holdings are worth $6.91 billion. Despite being the largest corporate entity currently holding the crypto asset, MicroStrategy declared its intention to increase its BTC portfolio with additional purchases. The business intelligence firm sold its convertible debt to raise funds to acquire more Bitcoins.