Shorts are clamoring against Coinbase as the leading cryptocurrency exchange enjoys a triumphant year in 2023.
As the company’s shares soared nearly 400%, short sellers suffered losses exceeding $4.2 billion, marking a considerable hit to those who bet on the downside.
Despite these astronomical losses, short investors remain persistent in their negative bets.
Short interest, which represents the number of Coinbase shares sold short, is around $4 billion according to S3 Partners, a data analytics firm.
This persistence has fueled the possibility of a phenomenon known as a “short squeeze.”
The short squeeze becomes increasingly likely as Coinbase’s stock price continues its rise, forcing short sellers to buy shares to cover their positions.
This bullish movement generated by the need to cover short positions can further amplify the share price.
Coinbase’s exponential growth has been driven by various factors.
The resurgence of interest in cryptocurrencies, along with the expectation of the approval of a Bitcoin ETF, has significantly influenced the company’s valuation.
Coinbase’s participation in shared custodian agreements and its role as a preferred custodian have also been key drivers of its success in the market.
Despite this winning streak, some prominent investors, such as Jim Chanos, maintain their bearish stance towards Coinbase.
Chanos, known for his skeptical and previously successful stance against Enron, remained short Coinbase since 2022, anticipating a devaluation.
In this bullish trend scenario, the market faces uncertainty about how the situation will develop in 2024.
Short bets persist despite huge losses, leaving in the air the possibility of a shocking short squeeze that could trigger an even bigger rise in Coinbase’s stock price in the near future.
