Crypto short sellers have lost at least $6 billion this year trying to bet against publicly traded crypto firms, largely due to Bitcoin's (BTC) outsized rally since Jan. 1.
According to a Dec. 5 report from research firm S3 Partners, traders betting against publicly traded crypto firms like Coinbase, MicroStrategy and Marathon Digital are now suffering $6.05 billion in losses on paper.
The majority of losses for short sellers were concentrated in the last three months. After Bitcoin fell to a quarterly low of $25,133 on September 11, short sellers increased their exposure to what they believed was an overbought sector.
Unbeknownst to traders taking short positions, Bitcoin would post a 77% increase, reaching a new annual high of $44,481 on December 5, according to price data from Cointelegraph. This quick upward move caused short sellers to lose around $2.65 billion.
Total loss by short sellers in crypto-related stocks year-to-date. Source: S3 Partners
“Buying to cover the most heavily shorted crypto stocks such as Coinbase Global, MicroStrategy, Marathon Digital Holdings and Riot Platforms will help drive share prices higher, along with the long buying that has driven share prices since late October S3 managing director and forecast analyst Ihor Dusaniwsky wrote in the report.
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Bitcoin's 161% year-to-date rally has been a key driver of crypto company stock prices, with Coinbase and MicroStrategy growing 312% and 285%, respectively, over the same period.
Bitcoin's outsized rally has pushed up the price of publicly traded crypto firms. Source: TradingView
Bitcoin is trading for $43,964 at the time of writing, with the recent rally driven by growing anticipation of a possible spot Bitcoin ETF approval in January.
Coinbase is the most unsuccessful trade for short sellers. The company's nearly 290% surge resulted in more than $3.5 billion in losses for short sellers. Close behind was the growth of MicroStrategy, where short sellers lost more than $1.7 billion.
Despite mounting losses, some short sellers have continued to add to their positions, betting that the current rally will soon run out of fuel. Since Bitcoin's mid-September rally, $697 million in new short positions have been added.
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