Thanks to a surge in bitcoin’s price, Strategy (MSTR) is having a great day on Wall Street despite some alarming balance sheet data.
Among global equities valued above $25 billion, Strategy Inc. (MSTR) now carries the largest short position relative to its size. Roughly 14% of its $41.6 billion market capitalization has been sold short, placing it at the top of rankings compiled by firms including Goldman Sachs and FactSet.
This is not a typical short story. Strategy trades as a corporate balance sheet wrapped around Bitcoin. Its equity functions as a leveraged instrument on BTC, shaped by debt issuance and continued accumulation under Executive Chairman Michael Saylor.
The company holds more than 700,000 BTC acquired through a mix of convertible notes, equity offerings, and cash flow from its legacy software business. When Bitcoin rises, Strategy’s equity often expands at a faster rate due to embedded leverage. When Bitcoin falls, the compression works in reverse.
At the time of writing, Bitcoin is surging 6.5% on the day near $68,000. Strategy shares are up nearly 8%.
Strategy’s mark-to-market losses mount
Strategy currently sits on roughly $7 billion in unrealized losses tied to its Bitcoin holdings. The losses reflect mark-to-market accounting, not liquidation.
The coins remain on the balance sheet. Markets, however, price forward risk. Declines in BTC reduce asset coverage relative to outstanding debt. That dynamic sharpens volatility in MSTR.
A 14% short interest ratio at this scale signals conviction. Hedge funds hold about 3% of the equity float, and more than 50 funds report positions. Yet not all short positioning represents outright bearish bets.
Market participants point to basis trades. In this structure, firms purchase spot Bitcoin exposure — often through vehicles such as iShares Bitcoin Trust (IBIT) from BlackRock — while shorting MSTR.
The objective is to capture the premium or discount between Strategy’s equity value and the underlying Bitcoin it holds, rather than predict a collapse in BTC.
Trading firms including Jane Street have disclosed large positions in both IBIT and MSTR, suggesting paired strategies that aim to remain market neutral.
Still, structural tension remains. If Bitcoin stages a sharp rally, short sellers face pressure to cover. Strategy’s thin float relative to demand can amplify upward moves. Conversely, further BTC drawdowns would intensify scrutiny on leverage and refinancing risk.
Earlier this week, Strategy said they completed their 100th bitcoin purchase since 2020, acquiring 592 BTC for roughly $39.8 million at an average price of $67,286 per coin, funded through the sale of 297,940 Class A shares via its at-the-market offering program.
With this latest buy, the company now holds 717,722 BTC acquired for $54.56 billion at an average of $76,020 per bitcoin, maintaining the largest corporate bitcoin treasury globally.
Source: https://bitcoinmagazine.com/markets/strategy-mstr-becomes-shorted-25b
