MicroStrategy (ticker: MSTR), often referred to as a “Bitcoin proxy,” has recently become a major target for Wall Street's long-short strategies. These strategies involve shorting the company's stock while going long on Bitcoin, aiming to exploit arbitrage opportunities. Traders now believe that the strong correlation between MicroStrategy’s stock and Bitcoin prices has weakened, and the premium embedded in MSTR’s share price is excessive.
The divergence between MSTR and Bitcoin prices became pronounced starting May 8. As of May 27, MSTR closed at $372.2, marking a 10% decline over about three weeks, while Bitcoin rose roughly 7% during the same period. In the past, the two moved more closely in tandem, either trending in the same direction or converging over time. The fact that Bitcoin recently neared an all-time high around $112,000 further highlights the decoupling from MSTR's stock price.
One of the most vocal proponents of the “short MSTR, long Bitcoin” strategy is famed short-seller Jim Chanos. In a CNBC interview aired on May 14, Chanos revealed that he’s shorting MSTR while buying Bitcoin. He argued that MSTR is trading at an unjustified premium relative to the value of the Bitcoin it holds. According to Chanos, shorting MSTR is akin to “selling something worth $1 for $2.50.”
Chanos isn't alone in his view. On May 22, asset management firm VanEck echoed similar sentiments, as did crypto research firm 10x Research. 10x noted that despite Bitcoin’s new all-time highs, MSTR’s stock remains stagnant, indicating waning investor interest. Currently, MSTR’s short interest stands at 10.1%, down from April’s 11.2% but up from 8.8% in March.
The Premium Argument
The essence of the long-short strategy and its core rationale — the so-called "premium excess" — can be explained through Chanos’s reasoning:
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The "short MSTR, long Bitcoin" trade follows the traditional long-short framework — sell the overvalued asset and buy the undervalued one, even though both are exposed to the same underlying (Bitcoin). In this case, buying Bitcoin gives you direct exposure, while buying MSTR effectively gives you indirect exposure at 2.5x the cost (excluding MicroStrategy’s core software business, and viewing it solely as a Bitcoin holding company). The strategy aims to profit until this premium theoretically compresses to zero.
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Chanos’s remark about “selling something worth $1 for $2.50” implies that the market is assigning a 150% premium to MSTR’s Bitcoin holdings. Although he didn’t share his exact calculation method, the ratio can be roughly estimated by dividing MSTR’s enterprise value (EV) by the market value of its Bitcoin holdings.
For example, on May 14 (the day Chanos's interview aired), MicroStrategy was estimated to hold 568,840 BTC. With Bitcoin priced at $103,268 on that day, the total value of MSTR’s Bitcoin holdings was approximately $58.7 billion. MicroStrategy’s enterprise value, however, was about $123.4 billion — making the ratio around 2.1x. While there may be discrepancies due to methodology or timing, the numbers are directionally consistent with Chanos's argument.
