Crypto Short Sellers Swallow $6 Billion Loss Amid Bitcoin's Surging Value in 2021
Summary:
Short sellers in the crypto market have faced heavy losses of about $6 billion this year, mainly due to a significant surge in Bitcoin's value since January 1. S3 Partners' recent report highlights that traders betting against crypto shares like Coinbase, MicroStrategy, and Marathon Digital have accumulated hefty paper losses. Despite these losses, some short sellers continue to invest, anticipating an end to the ongoing rally. The price surge of Bitcoin played a crucial role in driving up share prices of crypto firms.
Short sellers in the cryptocurrency market have amassed losses of at least $6 billion this year, primarily because of the significant surge in Bitcoin's (BTC) value beginning from the first day of the year. Research firm S3 Partners released a report on Dec. 5, pointing out that traders who took positions against crypto shares like Coinbase, MicroStrategy, and Marathon Digital accumulated $6.05 billion worth of paper losses. These losses intensified during the past quarter. Following BTC’s drop to a three-month low of $25,133 on Sept. 11, short sellers amplified their risk in a sector they presumed was overvalued. However, they were caught unawares when BTC rallied by 77%, hitting a fresh high for the year on Dec. 5 at $44,481, as per data from Cointelegraph. This sudden upward trajectory triggered short sellers' losses amounting to $2.65 billion. Ihor Dusaniwsky, S3's managing director of predictive analysis, stated in the report that closing short positions in heavily shorted crypto stocks like Coinbase Global, MicroStrategy, and Marathon Digital Holdings would further drive up stock prices, along with the persistent buying that has escalated stock prices since October's end. Observers also noted that the 161% rally in Bitcoin this year has greatly influenced the share prices of cryptocurrency firms. For instance, within the same period, Coinbase and MicroStrategy stocks appreciated by 312% and 285% respectively. At the time of writing, the trading price for BTC stood at $43,964, the recent surge being attributed to intense expectations of an approval for a Bitcoin spot ETF in January. For short sellers, Coinbase proved the most unprofitable, with the firm’s almost 290% rally incurring losses exceeding $3.5 billion. MicroStrategy follows closely with short sellers recording more than $1.7 billion in losses due to its growth. Despite escalating losses, some short sellers remain unwavering, wagering that the ongoing rally will soon lose momentum, with around $697 million in new short positions being instituted since BTC’s rally in mid-September.
Published At
12/7/2023 7:24:41 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.