Crypto short sellers face $1.9 bn loss as Bitcoin surges

For the month of March, crypto-related short positions have declined by 39.2%, translating to a $4 billion loss, and a remarkable 79.1% decrease year-to-date, totalling a $5.7 billion loss.

Despite these significant setbacks, the sector witnessed net short covering, primarily driven by substantial short covering in Coinbase, which more than compensated for the increased short selling observed in MicroStrategy throughout the year.

However, the overall short interest in crypto stocks saw an increase of $3.67 billion, reaching $10.71 billion in 2024. This increase is attributed to a $3.98 billion mark-to-market rise in the share prices of the shorted stocks, slightly offset by $302 million in short covering.

Short sellers in the crypto stock sector appear to be doubling down, possibly in anticipation of a pullback in Bitcoin’s rally or utilizing short positions as a hedge against actual Bitcoin holdings. Depending on the nature of these trades—whether as risk positions or hedges—the future of short interest in the sector could vary significantly. According to S3 Partners, those betting against the market may face a potential squeeze, especially in highly shorted stocks such as MSTR, COIN, and CleanSpark Inc, an American Bitcoin miner, whereas hedge positions might maintain steady short interest levels regardless of Bitcoin’s performance.

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