Crypto Stocks, Short Squeeze Fear as Bitcoin (BTC) Rises

▲ Coinbase (COIN)/AI Generated Image

As Bitcoin (BTC) breaks the $80,000 mark and continues its strong rally, short sellers are heavily selling virtual asset-related stocks as a risk-hedging tool. However, a warning has emerged that this massive short selling could actually trigger a powerful short squeeze, acting as a catalyst to push stock prices higher.

According to Benzinga, a U.S. financial media outlet, on September 28 (local time), financial data analytics firm S3 Partners analyzed that short interest in three stocks – Strategy (MSTR), Coinbase Global (COIN), and Strive (ASST) – has surged. This diagnosis suggests that investors have built up large short positions, betting on the decline of these stocks and using them as a hedge against Bitcoin's rise.

Investors targeted corporate stocks directly for short selling instead of iBIT, a Bitcoin spot ETF. While iBIT's short interest ratio remains low, selling pressure has concentrated on Strategy and Strive, which hold large amounts of Bitcoin on their balance sheets, and Coinbase, a major exchange. These three stocks have a high correlation coefficient of 0.7 or more with Bitcoin's price, higher than the S&P 500 or Nasdaq 100 indices in the U.S. stock market.

S3 Partners identified Strive as the most noteworthy candidate for a short squeeze among the three stocks. This is because its company size is relatively small, and it receives less market attention, yet its short interest ratio is significantly higher. Currently, Strive's short interest as a percentage of its float stands at approximately 26%.

The fact that the stock price has already seen a sharp rise also contributes to the short squeeze pressure. Strive's stock price has increased by 33.9% over the past month and surged by 210% over the last six months. While there is caution about further upside potential due to the short-term surge, it is observed that if Bitcoin stages an additional rally, forced liquidation of short positions could follow, triggering an explosive surge in stock prices.

As Bitcoin's price surpasses $80,000 and gains momentum, the massive short interest concentrated in related stocks is emerging as a potential trigger. If a short squeeze scenario unfolds where bearish bets are converted into forced buying, the price volatility of virtual asset-related stocks is expected to be maximized.

[Key Article Summary]

-S3 Partners stated that short selling of Strategy (MSTR), Coinbase (COIN), and Strive (ASST) surged as a hedge against Bitcoin (BTC) breaking $80,000.

-Instead of iBIT, investors heavily shorted corporate stocks that show a high correlation of 0.7 or more with Bitcoin.

-Strive (ASST), with a short interest ratio of 26%, has been identified as a strong short squeeze candidate if Bitcoin continues to rise.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*