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MicroStrategy's Short Interest Hits Record High Amidst Bitcoin Rally

MicroStrategy’s Short Interest Soars to $3 Billion: Potential Short Squeeze on the Horizon?

Mar 04, 2024
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Short sellers amass $3 billion in bets against MSTR, hinting at a bullish backlash amidst Bitcoin's ascent, reminiscent of GameStop's saga.

MicroStrategy, the largest corporate holder of Bitcoin, has recently seen its short interest surge to an astounding $3 billion, equivalent to 20% of its float. This suggests that investors shorting the stock are highly pessimistic about its future price, yet it also hints at the potential for a significant short squeeze.

Despite Bitcoin’s (BTC) recent rally, which indirectly benefits MicroStrategy, a considerable number of investors are placing substantial bets against MSTR. These short positions account for roughly 20% of the company’s total shares available, as noted by Andrew Kang in a post on March 4.

Kang, a cryptocurrency entrepreneur, suggests that many of these short sellers are “angry TradFi boomers aiming to capture the premium to [net asset value (NAV)].” Interestingly, this premium dropped from 50% prior to the approval of the spot Bitcoin exchange-traded fund (ETF) to 13% after, only to rebound to the current high of 70%.

Kang also proposes the possibility of a significant price rally akin to the GameStop scenario. In that case, hedge funds had taken substantial short positions in GME, but retail investors on Reddit’s WallStreetBets purchased large amounts of the shares, triggering a short squeeze and causing the price to soar.

Additionally, Kang points out that MSTR has grown large enough to be included in the S&P500 index. He also notes that “MSTR as levered BTC is back baby,” referring to MicroStrategy’s leveraged position in the leading decentralized finance (DeFi) asset making a comeback.

The exceptionally high short interest in MSTR stocks indicates a prevailing bearish sentiment. However, if Kang’s analysis proves accurate, it could also result in a backlash against the short sellers, especially considering that high short capitalizations also present squeeze opportunities for the bulls.

Currently, MSTR stock is priced at $1,079.40, marking a 5.53% increase on the day. It has also gained 56.90% over the past week and surged as much as 112.48% on its monthly chart, outperforming 99% of all other stocks in terms of its yearly performance.

Furthermore, it is outperforming 97% of the other 279 stocks in the software industry. It has also reached a new 52-week high, aligning with the performance of the broader market, and maintains a healthy liquidity with 1.5 million shares traded per day.

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