According to Bloomberg, the surge in Bitcoin prices has driven the rise of cryptocurrency-related stocks, but short sellers are still betting billions of dollars that this rally will eventually end.
A report released on Monday (25th) by S3 Partners LLC shows that the total short interest (i.e., the amount of collateral pledged by reverse traders on cryptocurrency stocks) has increased to nearly $11 billion so far this year. Of the short interest in the industry, over 80% is focused on bets against business intelligence software company MicroStrategy and cryptocurrency exchange Coinbase.
Due to Bitcoin’s over 65% increase since the beginning of the year, which has driven the rise of the entire industry, this group of investors has accumulated losses of nearly $6 billion. Nevertheless, these investors are still increasing their short positions.
Ihor Dusaniwsky, Managing Director of S3’s Predictive Analytics Department, stated in the report:
In the past 30 days, traders betting on a decline in cryptocurrency-related stocks have increased their positions, especially against MicroStrategy. According to S3’s data, traders have put in $974 million betting that the company will fall, surpassing the amount spent on short covering stocks of companies such as Coinbase, cryptocurrency mining companies Marathon and Hive Digital Technologies during this period.
Source:
Bloomberg
S3’s data shows that the increase in short interest has driven MicroStrategy’s short interest to over 20% of its total outstanding shares. Currently, the company is one of the most shorted stocks in the U.S. market, alongside larger companies like Nvidia, Microsoft, and Apple. If the short sellers’ bets on cryptocurrency-related stocks are wrong, they may face even greater losses, and many stocks could experience a short squeeze.
Data source:
Bloomberg
