Analysts say that if short sellers bet wrongly on cryptocurrency concept stocks, they may face huge losses, especially if it triggers a short squeeze. Companies like MicroStrategy, Coinbase, and Cleanspark may experience a short squeeze due to their rising stock prices and limited availability of shares to short
According to the latest report released by S3 Partners, the total short position of cryptocurrency-related stocks has increased to nearly $11 billion year-to-date, with over 80% of the short positions concentrated in "Bitcoin holders" MicroStrategy and digital currency exchange Coinbase.
As Bitcoin has risen by over 65% year-to-date, driving a general increase in cryptocurrency-related stocks, short sellers betting on the decline of the above-mentioned stocks have accumulated unrealized losses of $6 billion. However, they are still increasing their short positions and remain resolute in their bearish stance.
Ihor Dusaniwsky, Managing Director at S3 Partners, stated in the report: "Short sellers betting on the decline of cryptocurrency-related stocks have been shorting on rallies, either expecting the rise in Bitcoin to be unsustainable or using short positions as a hedge."
In the past 30 days, despite the rise in stock prices of companies like MicroStrategy, short sellers have increased their short positions. Specifically for MicroStrategy, shorts have bet $974 million, completely offsetting the closing of short positions caused by the rise in stock prices during the same period. Currently, short positions in MicroStrategy account for approximately 20% of its outstanding shares, making it one of the most shorted stocks in the U.S. market.
Analysis suggests that if short sellers are wrong in their bets on cryptocurrency-related stocks, they may face even greater losses, especially if it triggers a short squeeze. According to S3's report, MicroStrategy, Coinbase, and Cleanspark may face a short squeeze due to their rising stock prices and limited stocks available for shorting. As of Tuesday's U.S. market close, year-to-date, MicroStrategy's stock price has risen by over 170%, Coinbase by about 70%, and Cleanspark by over 110%.