S3 Partners’ Latest Report
Bitcoin’s recent rally has brought significant losses to crypto stock short sellers. According to the latest report from S3 Partners, a financial data company, short sellers have incurred a collective loss of more than $2.5 billion since Bitcoin’s price started surging.
On September 11, BTC dropped to a 3-month low of $25,201. Since then, the largest cryptocurrency by market cap has rallied massively, reaching $43,897 as of this writing. Similarly, crypto stocks have seen their prices grow, thus turning short sellers’ portfolios red.
Stocks like MicroStrategy and Coinbase tend to follow the performance of the wider crypto market. They have posted significant gains following Bitcoin’s uptrend. Coinbase stock, COIN, is trading at $143.54 after rising 52% in the past 30 days. On the other hand, MicroStrategy stock, MSTR, is up 83% over the past two months to trade at $567.87 as of this writing.
Short Sellers on MSTR and COIN Suffered the Most Losses
In its report, S3 Partners noted that 51% of the lost $2.5 billion was incurred by sellers who opened short positions on COIN. Meanwhile, traders who short MSTR accounted for 25% of the combined loss. Per the report, cryptocurrency stock short sellers have suffered a $6.1 billion loss since the start of the year.
And it is getting worse for these traders, according to S3 Partners’ X post shared yesterday. The financial data company reported on Wednesday that short sellers had lost more than $380 million the previous day. S3 Partners is now anticipating a massive short squeeze in the coming days. For beginners, a short squeeze is a scenario where short sellers purchase crypto stocks in an effort to cover their losses, thus pushing the prices of these stocks higher.
What is Fueling BTC’s Rally?
So why is Bitcoin rallying? Much of the bullish momentum is due to the growing optimism that the US Securities and Exchange Commission will allow a Bitcoin spot ETF (Exchange-traded Fund) to enter the market. The investment product will make it possible for traditional investors to be exposed to BTC without owning the coin. Crypto analysts believe that a Bitcoin ETF will cause the digital asset market valuation to increase by $1 trillion.
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