Short sellers have had a field day in various sectors of the US stock market this year, but no other sector “withstood the pull” of the blockchain industry as Profits of Cryptocurrency Firm Short Sellers Jumped 126% in 2022, New Data Shows.
On Thursday, the technology and data analysis firm S3 Partners released a video summarizing its recent report, which found that overall US stock short sellers were up on average more than 30% for the year..
Some of these gains are attributed to the short selling of auto and component stocks (up 54%), software and services stocks (up 50%), media and entertainment stocks (up 46%) and retail stocks (up 46%) in the yearthough they all pale in comparison to crypto stocks, which saw short-selling profits surge 126% in 2022:
“But none of these industries hold a candle to short sellers in the crypto sector, with a 126% rise in average short interest of $3 billion.”
Crypto stocks with the most short interest include exchange Coinbase Global, Bitcoin miner Marathon Digital Holdings, and MicroStrategy.a software company that is also known to be the largest holder of Bitcoin (BTC) listed on the exchange.
#crypto short sellers are up over 30% in 2022! ⁰⁰
Want to know what’s on the horizon? Check out the video below to learn more.⁰#s3data #markets #shortinterest #trading #hedgefunds #sentiment $COIN $MSTR $MARA @ihors3 pic.twitter.com/LQLmAwjZFk
— S3 Partners (@S3Partners) June 16, 2022
Cryptocurrency Short Sellers Up Over 30% in 2022! ⁰⁰
Do you want to know what the future holds? Check out the video below to find out more. ⁰#s3data #markets #shortinterest #trading #hedgefunds #sentiment $COIN $MSTR $MARA @ihors3 pic.twitter.com/LQLmAwjZFk
Short selling occurs when an investor borrows a security and sells it on the open market with the expectation of buying it back in the future for less, pocketing the difference.. This is profitable when prices go down.
Short interest is the total number of shares of a particular security that have been shorted by investors but have not yet been hedged or closed. High or rising short interest could indicate investors are bearish on a certain stock.
At the time of writing this article, Coinbase stock is down 79.67% YTD, Marathon Digital is down 80.02% YTD, and MicroStrategy is down 71.10% YTDaccording to Google Finance.
However, S3 Partners says that while the pace of cryptocurrency short selling has remained high, with $71 million of new short sales over the time period, the pool of shares available to borrow is running low, meaning “potential short sellers may be late to the party”:
“With borrower stock utilization at 91%, short sales in size can be difficult to execute, and loan fees can make it expensive for new and existing short sales.”
Utilization is measured by the number of shares borrowed divided by the shares available in the stock lending market. A high utilization rate indicates that demand for the stock by short sellers is high..
On Tuesday, S3 Partners managing director of predictive analytics Ihor Dusaniwsky told his 82,000 Twitter followers that Coinbase short interest reached $1.52 billion on June 14, while MicroStrategy short interest reached $689 million. Marathon Digital Holdings short interest amounted to USD 181 million.
The fall in the prices of crypto shares accompanies the collapse of the prices of cryptocurrencies and the fall of traditional markets amid sharp rises in interest rates and high inflation.
On Thursday, bitcoin price fell as low as $20,205 as crypto hedge fund Three Arrows Capital (3AC) was rumored to be bankrupt..
Recent price movements have led some analysts to believe that a long period of consolidation and accumulation is ahead for the cryptocurrency market..
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