Bitcoin’s Rebound Crushes Crypto Stock Shorts, Resulting in $2.6 Billion in Losses
A new report from financial data firm S3 Partners reveals that short sellers in the crypto market have suffered losses of over $2.6 billion in less than three months due to Bitcoin’s aggressive rebound. Since September 11, when Bitcoin hit a three-month low of $25,152, the coin has surged by 75% and is currently priced at $43,924. This unexpected rise has caught short sellers off guard.
Crypto Stocks Follow Bitcoin’s Lead
Crypto stocks such as Coinbase and MicroStrategy tend to move in line with the broader crypto market and have experienced significant gains as a result of Bitcoin’s upward trajectory. Coinbase stock has risen by 51% in the past month alone, reaching $143.63. MicroStrategy, which holds around $6.6 billion worth of Bitcoin, has seen an 82% increase since October, with its stock reaching $568.88.
As a consequence of these substantial gains, short sellers in crypto stocks have incurred losses amounting to $2.656 billion in the last three months. More than half of these losses were attributed to shorting Coinbase stock, while another 25% resulted from shorting MicroStrategy stock. Since January, when Bitcoin was valued at nearly a third of its current price, crypto stock short sellers have lost approximately $6.05 billion.
A Bleak Outlook for Short Sellers
The situation is only worsening for short sellers as they lost over $387 million within just 24 hours on Tuesday, according to S3 Partners’ estimates. These conditions are setting the stage for a significant short squeeze, where underperforming short sellers are forced to buy stocks to cover their losses, further driving up stock prices.
Optimism Surrounding Bitcoin ETF Approval
Bitcoin’s recent surge can be attributed, in part, to growing optimism surrounding the potential approval of a spot Bitcoin ETF by the Securities and Exchange Commission (SEC). This financial product would allow traditional financial institutions and investors to gain exposure to Bitcoin without actually holding the cryptocurrency. Analysts estimate that a Bitcoin ETF could bring over $1 trillion in new investment into the crypto market.
Resurgence of Altcoins and NFTs
While Bitcoin has been leading the way, other cryptocurrencies like Ethereum and Solana, as well as meme coins such as PEPE and BONK, have also experienced notable resurgences. Additionally, the broader NFT market has seen increased activity.
Hot Take: Short Sellers Feel the Heat as Bitcoin’s Rebound Surprises
The unexpected rebound of Bitcoin has left short sellers in the crypto market reeling, resulting in significant losses. With Bitcoin’s upward momentum driven by anticipation of a potential Bitcoin ETF approval, short sellers are facing a bleak outlook. As altcoins and NFTs also gain traction, the crypto market continues to evolve rapidly, leaving short sellers scrambling to cover their positions.
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