Traders boldly gamble billions, predicting a short lifespan for the recent crypto stock surge. S3 Partners’ Monday report shows a near $11 billion rise in short positions for these stocks in 2023.
MicroStrategy and Coinbase, key Bitcoin stakeholders, are the main focus, attracting over 80% of this betting pool.
Even after a Bitcoin-driven sector boost led to $6 billion in unrealized losses, these traders press on.
They hope for a downturn or seek to offset their Bitcoin investments, explains Ihor Dusaniwsky from S3.
Lately, bets against MicroStrategy spiked despite its stock growth. Investors injected $974 million, surpassing funds for Coinbase, Marathon Digital Holdings, and Hive Digital Technologies.
MicroStrategy’s shorts now exceed 20% of its float, S3 notes, making it a top shorted stock in the US, on par with giants like Nvidia and Microsoft.
A further Bitcoin price increase might deepen traders’ losses, risking a short squeeze. This forces them to buy back stock, possibly hiking prices and affecting more traders.
MicroStrategy, Coinbase, and Cleanspark stand on the edge of such a squeeze.
Their shares have soared, thanks to Bitcoin’s rally and limited share availability for borrowing, the S3 report highlights.
This year, MicroStrategy nearly tripled in value, with Coinbase and Cleanspark also seeing significant gains.