MicroStrategy leads crypto sector short losses with $2 bln hit since March

The approval of several spot bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) in January has brought the once-nascent asset class closer to the mainstream.

Traders betting against crypto exchange Coinbase and bitcoin miner CleanSpark also lost $593.50 million and $106.40 million, respectively, the data showed.

MicroStrategy held nearly 190,000 bitcoin on its balance sheet as of the end of 2023 and has indicated it would continue increasing its exposure. It sold convertible debt twice within a week last month to raise money to buy more bitcoin.

The company’s ability to raise capital to purchase additional bitcoin is also a positive for shareholders, the brokerage added.

But despite the recent optimism, the crypto industry continues to be heavily shorted. Short interest in nine of the most-watched companies in the crypto space stood at 16.73 per cent of the total number of their outstanding shares, more than three times the average in the United States.

The SEC also remains uncomfortable with crypto and its approval of the spot bitcoin ETFs might not signal willingness to embrace other similar products, like spot ethereum ETFs, Reuters has reported.

The spot bitcoin ETF decision was not “indicative of a change in philosophy at the Commission,” said Alan Konevsky, chief legal and corporate affairs officer at online investment platform tZERO.

“I don’t think it’s a harbinger of more good things to come,” he said.

Short sellers sell borrowed shares and hope to buy them back at a lower price later, pocketing the difference.