Author: Eric, Foresight News
Original Title: The Most Short-Sell Targeted Company on Wall Street Turns Out to Be a Leading Cryptocurrency Stock
On February 24, the Financial Times' Alphaville column published an article titled "Mirror mirror on the wall, what is the most shorted stock of them all?" providing some very interesting data.
The article shows that the median short interest in S&P 500 index constituents has climbed to 2.7%, reaching one of the highest levels in nearly a decade. Among all the constituents, Strategy tops the list with a short interest accounting for 14% of its market value, while Coinbase ranks fourth with 11%. This means that among all U.S. listed companies with a market cap exceeding $25 billion, Strategy is the least favored.
Articles published in the Alphaville column do not represent the views of the Financial Times. Its style is known for being sharp-tongued and unsparing. Even as cryptocurrencies gradually move into the mainstream, articles about cryptocurrencies in the Alphaville column still spare no effort in criticizing them. Whether Bitcoin is $10 or $100,000, they consistently believe that cryptocurrencies are meaningless.
On February 2, Craig Coben, a seasoned investment banker who previously served as Vice Chairman of Global Capital Markets at Merrill Lynch and Head of Global Equity Capital Markets, also published an article in the Alphaville column criticizing Strategy's model.
Craig Coben's views are not extreme; he also believes that Strategy does not face a "run" risk in the short term and currently has no liquidity crisis. However, he pointed out some core issues, such as the fact that hoarding Bitcoin does not generate cash flow, requiring continuous financing and diluting common shareholders' equity. Additionally, Strategy's tendency to buy when market sentiment is high and Bitcoin prices are elevated is a systemic and unsolvable problem.
Regarding Strategy's high short interest, some analysts believe that not all short positions are "naked shorts" against the company; some may be used by hedge funds to hedge their Bitcoin spot holdings. Nevertheless, it still indicates that many are bearish on Strategy, at least believing that if Bitcoin falls, Strategy cannot remain unscathed.
In Craig Coben's article, he mentioned that Strategy refers to its five types of perpetual preferred stock as "digital credit," a concept that Michael Saylor has been emphasizing since the end of last year.
In this concept, the first layer, "digital capital," is Bitcoin. The second layer, "digital credit (or digital lending)," consists of the various perpetual preferred stocks issued by Strategy. These preferred stocks come with high yields, and Strategy must pay corresponding interest to holders annually.
The third layer is "digital currency," which includes stablecoins and other currencies issued based on the financial products in the second layer for trading purposes. For example, Saturn in the above image plans to issue USDat, a stablecoin based on STRC and U.S. Treasury bonds. This project has also received investment from YZi Labs.
If this logic is unclear, you can draw an analogy with the United States. The U.S. continuously issues Treasury bonds based on its influence, only needing to pay interest before maturity and using new debt to repay old debt upon maturity. As long as the international influence of the U.S. and the status of the dollar do not weaken, this game can continue indefinitely. For Strategy, Bitcoin is equivalent to U.S. influence, and digital credit is equivalent to Treasury bonds. Strategy also needs to borrow new debt to pay the annual interest on preferred stocks. However, as long as the price of Bitcoin continues to rise in the long term and drives up Strategy's stock price, the company can continuously issue new shares to raise funds, buy more Bitcoin, and pay interest, continuing this cycle indefinitely.
Michael Saylor is a firm believer that Bitcoin will change everything. In his view, Bitcoin's infinite rise is a more reliable bet than the U.S. always winning, so he is more willing to issue currency based on an asset that is "destined" to continuously appreciate, much like how the U.S. dollar was initially pegged to gold.
Strategy's strategy is not new. It only needs to ensure sufficient cash to pay interest, enabling it to continuously finance and buy Bitcoin. Like U.S. Treasury bonds, this is a game that everyone knows will eventually end but cannot determine how long it will last. Strategy's current financial reserves are also ample. Its CEO stated that Strategy would only be forced to sell Bitcoin if the price remains below $8,000 for 4 to 5 consecutive years.
If this extreme condition were to materialize, not only Strategy but the entire Web3 industry might disappear.
Even a traditional banker like Craig Coben must admit that Strategy will not face financial problems in the short term. However, for hedge funds, Strategy is an excellent tool to hedge against Bitcoin declines. For short sellers, it is reasonable to short a system that relies on Bitcoin's rise to function properly during a cryptocurrency downturn. At least for now, there are not many reasons to be bullish on Strategy.
Michael Saylor's attempt to launch a new currency using Bitcoin is itself interesting. U.S. dollars are used to buy Bitcoin, and U.S. dollars are used to pay interest. The goal of building a system with billions of U.S. dollars is ultimately to destroy the very bricks that built it. Perhaps Wall Street elites are also chuckling; after all, they have no interest in studying whether Strategy can truly become a century-old company. They only care about when your stock price will rise and when it will fall.
Michael Saylor believes that Bitcoin will inevitably continue to hit new highs, so he uses it as the foundation for everything. Holders and users of the U.S. dollar believe that the U.S. will continue to prosper, so they tolerate the continuous raising of the debt ceiling. Both are acts of belief—so who is to say which is superior?
Twitter:https://twitter.com/BitpushNewsCN
Bitpush TG Discussion Group:https://t.me/BitPushCommunity
Bitpush TG Subscription: https://t.me/bitpush
