Larry Tentarelli, Blue Chip Daily Trend Report chief technical strategist, said shorting MicroStrategy is difficult. At the start of March, shares plunged more than 20% in one day after the company said it would offer convertible notes to buy Bitcoin, which could have helped short sellers.
The contrarians may suffer more. If enterprise software maker shares rise, traders face a short squeeze, where sellers must buy back their lost holdings. Covering will raise share prices, pressuring the cohort.
The float of MicroStrategy shares is over 22%, which is bearish. S3 shows this is similar to most cryptocurrency-linked equities, including Coinbase Global Inc. and Marathon Digital Holdings Inc.
“These stocks are both more crowded and much more squeezable than the average US stock,” said S3 managing director of predictive analytics Ihor Dusaniwsky.
In response to MicroStrategy's Bitcoin buying strategy, Wall Street analysts raised their price estimates this week. Canaccord Genuity boosted its Street-high $1,810 price target from $975.
The corporation bought $822 million more digital assets this week, largely with private convertible note funds. Bitcoin hit a new record high of almost $73,000 this week as investors flocked to new exchange-traded funds.
Bitcoin Sets Record at $73,000 Due to Insatiable ETF Demand This is not a short-term trading strategy but rather reflects management’s belief that Bitcoin will ultimately prove a superior store of value,” Lance Vitanza of Cowen wrote on March 12. Vitanza raised his target to $1,560 from $1,220 and maintained an outperform rating.
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