Amid Bitcoin Overvaluation Debate, Short-Selling Whales Set Sights on 'Strategy'

▲ Strategy and Bitcoin (BTC) / AI-generated image

As investors betting on Bitcoin (BTC) price volatility shift their focus beyond the cryptocurrency itself to publicly listed companies holding large reserves of it, Wall Street short sellers are zeroing in on specific Bitcoin proxy stocks.

According to TheStreet on February 24 (local time), Strategy (MSTR) has recently emerged as one of the most heavily shorted stocks in the U.S. market, becoming a concentrated target for Wall Street players betting on its decline. By incorporating Bitcoin as a corporate treasury asset, Strategy has come to be viewed not merely as a software company but effectively as a vehicle for Bitcoin investment. As Bitcoin prices undergo a correction and the premium once attached to the stock price narrows, short sellers are building aggressive positions based on the view that Strategy’s corporate valuation is excessively overvalued relative to the value of its Bitcoin holdings.

Market analysts note that Strategy’s share price tends to amplify Bitcoin’s price swings. The period when the stock traded at a high multiple to its Bitcoin net asset value appears to have passed, and a more sober analysis of its financial statements and debt management capabilities is now underway. Short sellers are targeting the compression of valuation multiples, a trend that is also interpreted as a sign that speculative fervor across the broader digital asset market is cooling.

Veteran Wall Street investors caution that with short interest in Strategy reaching record levels, an unexpected rebound in Bitcoin prices could trigger a short squeeze. While heavy short-selling pressure may exert downward force on the stock in the short term, it could simultaneously act as a catalyst for significant volatility. In situations of elevated short interest, forced buying from short-covering can rapidly drive share prices higher.

Strategy has become the battleground for one of the most intense proxy wars reflecting the future direction of the Bitcoin market. As Wall Street strengthens its bearish outlook on the company, the trajectory of its stock price is expected to serve as a key gauge of how institutional investors’ crypto exposure strategies have evolved since the introduction of spot Bitcoin ETFs. The financial resilience of a company committed to expanding its Bitcoin holdings is now being put to the test.

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