The Zhitong Finance App learned that bears are still strongly betting that the rise in crypto-related stocks driven by Bitcoin's surge will eventually come to an end. Total short positions in cryptocurrency stocks have risen to nearly $11 billion this year, according to a report from S3 Partners LLC on Monday. Over 80% of short positions are against MicroStrategy (MSTR.US) and Coinbase (COIN.US).
The bears' book losses have risen to nearly $6 billion as Bitcoin's rise so far this year has boosted related cryptocurrency assets by more than 65%. Despite this, the bears are doubling their bets.
Ihor Dusaniwsky, managing director of S3 Predictive Analytics, said in the report: “Crypto stock bears have been selling in a rebound market — either looking for a pullback in Bitcoin's gains or using short positions to hedge against actual Bitcoin holdings.”
Over the past 30 days, traders who have shorted crypto-related stocks have increased their positions, especially as MicroStrategy's share price climbed. Traders have already invested $974 million, betting that the enterprise software maker will fall. According to S3 data, this exceeded the short compensation for Coinbase, Marathon Digital (MARA.US), and Hive Digital Technologies shares during the same period, that is, reverse investors bought back shares and exited the transaction.
Short positions on MicroStrategy account for more than 20% of its total outstanding shares. MicroStrategy is currently one of the most heavily shorted stocks in the US market. The shorting scale is comparable to that of large companies such as Nvidia (NVDA.US), Microsoft (MSFT.US), and Apple (AAPL.US).
Of course, bears could face more pain if their bets on crypto-related stocks are wrong.
According to the S3 report, given the rebound of MicroStrategy, Coinbase, and CleanSpark (CLSK.US) and the limited number of stocks available for short sale, there may be a short market where bears are forced to buy back the stock to exit their positions, thus driving up the stock price and putting further pressure on other traders.
Since this year, MicroStrategy has risen by nearly 200%, while Coinbase and Cleanspark have increased by about 60% and 115%, respectively.