Bitcoin's Rally Crushes Crypto Stocks Short Traders, Resulting in $2.6B in Losses Over Last 3 Months
Bitcoin (BTC)'s recent aggressive rebound has dealt a devastating blow to short sellers of crypto stocks, resulting in losses exceeding $2.6 billion in less than three months, according to financial data firm S3 Partners. The rally began on September 11, when Bitcoin hit a three-month low of $25,152, and since then, the coin has surged by an impressive 75% to its current price of $43,975. This unexpected rise has caught short sellers off guard.
Crypto stocks, such as Coinbase and MicroStrategy, tend to correlate with the broader crypto market and have experienced significant gains due to Bitcoin's improving fortunes. Coinbase stock alone has surged by 51% in the past month, reaching $143.63. Meanwhile, MicroStrategy, which holds approximately $6.6 billion worth of Bitcoin, has seen an 82% increase since October, with its stock now valued at $568.88.
As a result of these substantial upswings, short sellers of crypto stocks have incurred losses of $2.656 billion over the past three months. More than half of these losses were generated from shorting Coinbase stock, with an additional 25% arising from shorting MicroStrategy stock.
Short sellers in the crypto market have experienced significant losses since January, totaling around $6.05 billion. The situation worsened on Tuesday when they lost over $387 million in just 24 hours, setting the stage for a potential short squeeze where struggling short sellers purchase stocks to cover their losses, further driving up stock prices.
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