A recent surge in the price of Bitcoin (CRYPTO:BTC) across the $80,000 level has cryptocurrency investors excited. The surge could also have short sellers nervous as they hedge their bets.
High Shorted Crypto Stocks
Among the most shorted stocks are three companies with ties to Bitcoin.
New data from S3 Partners shows that shares of Strategy Inc (NASDAQ:MSTR), Strive Inc (NASDAQ:ASST) and Coinbase Global (NASDAQ:COIN) are all currently heavily shorted and candidates for short squeezes.
The report says the increased short interest in all three names could be a bet that the stocks will go down and could also be a hedge against the rising price of Bitcoin.
Unlike the three stocks, the iShares Bitcoin Trust (NASDAQ:IBIT) has low short interest. S3 Partners says this indicates that investors hedging the price of Bitcoin aren’t shorting the Bitcoin ETFs and could be shorting stocks that hold Bitcoin on their balance sheet like Strategy and Strive or a major cryptocurrency exchange like Coinbase.
Strive, Strategy, and Coinbase all have correlation coefficients of 0.7 or higher with the price of Bitcoin, while having much lower correlations with the S&P 500 and Nasdaq 100.
Strive the Stock to Watch
Of the three names, S3 Partners singles out Strive as being much smaller and less followed, with a much higher short interest rate. This increases the likelihood of a short squeeze for Strive.
Strive stock has already surged in recent months with shares up 33.9% over the last month and up 210% over the last six months.
That increase could lower the short squeeze potential with the share price already elevated, but with high volatility for cryptocurrency and crypto-related stocks in past years, nothing is out of the question.
With around 26% of shares short and a high correlation to the price of Bitcoin, another rally in the price of the leading cryptocurrency could put the spotlight on Strive and short squeeze potential once again.
Photo: Mino Surkala from Shutterstock
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