Tom Lee Predicts Surge in Strategy Stock, "The Bottom Comes When Short Sellers Pile In"

▲ Strategy (MSTR), Bitcoin (BTC) / ChatGPT-generated image

Amid a sharp surge in Bitcoin (BTC), shares of Strategy (MSTR) are signaling a strong rebound after breaking through excessive short-selling pressure, increasing the likelihood that the market has reached a bottom.

According to a February 25 report by cryptocurrency outlet CoinGape, citing analysis from Bitmine Chairman Tom Lee, Strategy’s stock may have reached a meaningful low. Lee explained that when short sellers crowd excessively into a single trade, stocks tend to find a bottom. Strategy’s net short interest currently stands at approximately $4.85 billion, accounting for 10% to 11% of its total market capitalization—the highest level among large-cap U.S. stocks.

Strategy shares reacted immediately as Bitcoin jumped 5.76% in a single day to surpass $66,569. According to Goldman Sachs Global Investment Research data, large hedge funds are pursuing a strategy that simultaneously takes long positions in Bitcoin and short positions in Strategy, aiming to profit from the premium to its net asset value. Wall Street is heavily betting that Strategy’s net asset value multiple, currently around 1.2 times, will converge to below 1 time.

Market experts suggest that the record-high short interest could instead trigger a short squeeze. Lee noted, “When the market has already priced in all negative factors, a paradoxical situation can occur where the stock rises even on bad news.” Analyst Donald Dean also assessed that once Bitcoin stabilizes, Strategy will be among the first to rebound, with solid support forming around the $100 level.

The recent overheating of short selling in Strategy stems from the gap between the company’s Bitcoin holdings and its corporate valuation. X (formerly Twitter) analyst deadalnix said many funds are focusing on convergence trades, seeking to capture gains from Bitcoin’s price rise while narrowing Strategy’s relative overvaluation. However, as Bitcoin sends strong rebound signals and begins lifting Strategy’s market capitalization, currently about $39.72 billion, any forced covering by those betting on a decline could accelerate the stock’s upside momentum.

Strategy stands at a crossroads, potentially benefiting from both rising Bitcoin prices and the unwinding of short positions. If Bitcoin breaks through psychological resistance levels and stabilizes, Strategy is considered one of the large-cap stocks with the strongest recovery potential. Investors should closely monitor Strategy’s stock movement in tandem with Bitcoin, as Wall Street’s bearish bets could paradoxically act as a catalyst for further gains.

Disclaimer: This article is for investment reference purposes only, and no responsibility is assumed for any investment losses based on its contents. The information provided should be interpreted for informational purposes only.