Data from FactSet and Goldman Sachs indicates that Strategy (MSTR.US), a major Bitcoin holder associated with billionaire Michael Saylor, is experiencing substantial short selling—a market term reflecting strong bets on continued share price declines. However, some analysts suggest this positioning may not necessarily signal investor expectations of prolonged downward pressure.
According to a recent Goldman Sachs report, short positions against Strategy represent approximately 14% of its then $34 billion market capitalization, making it the most heavily shorted stock tracked in the report. Over the same period, cryptocurrency exchange Coinbase (COIN.US) ranked fourth with 11% of its shares sold short. The report monitors holdings in stocks with market capitalizations exceeding $25 billion.
This surge in short interest occurs against the backdrop of Strategy's Bitcoin holdings showing approximately $7 billion in unrealized losses. Since incorporating Bitcoin into its balance sheet in 2020, the company has accumulated 717,722 Bitcoins, currently valued at around $47 billion. As of the latest update, Strategy's market capitalization stands at approximately $44.52 billion, despite its stock having declined 12% year-to-date.
Meanwhile, Bitcoin traded at $66,653.26 per coin at the time of reporting, down from its peak of $126,080 reached on October 6. Analysts attribute the rising short interest to basis trading strategies, which profit from price discrepancies between related markets. In practice, traders can simultaneously purchase spot Bitcoin ETFs, such as BlackRock's IBIT, while shorting Strategy shares, allowing them to capture gains if Strategy's premium to its Bitcoin holdings narrows. When combined with paired futures contracts, traders may also earn funding rate income while maintaining market-neutral positions.
Bitcoin treasury specialist Brian Brookshire noted, "I suspect a significant portion of short positions still stems from MSTR/BTC basis trades. Notably, top market maker Jane Street has recently established unusually large IBIT positions." Recent 13F institutional filings reveal Jane Street acquired over 7 million shares of BlackRock's iShares Bitcoin Trust (IBIT) while maintaining substantial Strategy stock positions.
Separately, Anchorage Digital co-founder and CEO Nathan McCauley disclosed on February 25 that the digital bank has allocated capital to Strategy's perpetual preferred shares, STRC (STRC.US), within its balance sheet.