According to a report by Reuters, since November 6, Bitcoin has surged significantly due to market optimism regarding Donald Trump's implementation of a more favorable regulatory framework after taking office, pushing its historical high to even higher levels. Investors who shorted cryptocurrencies and blockchain-related stocks have therefore suffered significant losses.
According to data from analytics firm Ortex, traders who shorted MicroStrategy, the publicly traded company with the largest global Bitcoin holdings, lost over $1.2 billion between November 6 and November 8, with losses exceeding $6 billion year-to-date.
As of the close on November 8, the total losses from short trades against cryptocurrency exchange operator Coinbase, crypto miner Riot Platforms, MARA Holdings, and mining operator Bitfarms amounted to approximately $1.2 billion.
Susannah Streeter, head of currency and markets at Hargreaves Lansdown, explained the recent rise in Bitcoin:
"Bitcoin speculators are betting on a looser regulatory environment and are anticipating that authorities may establish a reserve cryptocurrency fund, which would help boost sustained demand."
Meanwhile, investors who shorted the world's largest Bitcoin ETF by assets under management—iShares Bitcoin Trust (IBIT)—have also lost nearly $37 million since November 6.
MicroStrategy's stock performance has far outpaced Bitcoin.
At the beginning of the year, many institutions publicly stated that MicroStrategy's stock price relative to Bitcoin's increase was overvalued, with some institutions even explicitly stating they were shorting MicroStrategy stock. According to a previous report by Zombit, the shorting firm Kerrisdale Capital stated in a research report published in March this year that the firm held a short position in MicroStrategy while simultaneously holding long positions in BlackRock and Fidelity's Bitcoin spot ETFs to hedge against upside risks. The report stated:
"We hold long positions in Bitcoin and short MicroStrategy stock, which is an alternative investment vehicle for Bitcoin that is trading at an unreasonable premium relative to the digital assets that drive its value. With the recent rise in Bitcoin prices, MicroStrategy's stock price has also surged. However, as is often the case in the cryptocurrency space, the situation has become overly aggressive."
However, looking at the performance from the beginning of the year to date, MicroStrategy has risen about 400%, while Bitcoin has risen about 100%, with MicroStrategy's performance still far exceeding that of Bitcoin.