Short-selling institutions publicly hold short positions in MicroStrategy: current price is at an unreasonable premium

According to The Block, short-selling firm Kerrisdale Capital stated in its latest research report that MicroStrategy’s stock is currently overvalued. The company currently holds a short position in MicroStrategy and at the same time holds long positions in Bitcoin spot ETFs from BlackRock and Fidelity to hedge against upward risks. The report states that due to MicroStrategy’s large holdings of Bitcoin spot, its stock has been seen as a major way for the US financial market to bet on Bitcoin in the past. However, with the introduction of Bitcoin spot ETFs, US financial market investors now have more choices. Kerrisdale Capital stated in the report that it is possible that they are not the only institution “long Bitcoin while shorting MicroStrategy”. During the rise of Bitcoin, the speed at which MicroStrategy’s stock price increases is much higher than that of Bitcoin, resulting in a premium of MicroStrategy relative to Bitcoin. This has attracted many institutions to start trading the price difference between MicroStrategy stock (MSTR) and Bitcoin. However, there have been no signs of weakness in MicroStrategy so far, which seems to have left many traders or institutions currently in floating losses or even facing liquidation. According to a report in mid-March, the shorts betting on the decline of MicroStrategy’s stock price have accumulated about $3.3 billion in unrealized losses from 2024 to mid-March.

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