Microstrategy Short Squeeze: What Investors Need to Know

A microstrategy short squeeze can be a wild ride for investors, and it's essential to understand what's happening. In a microstrategy short squeeze, a stock's price surges due to a surge in buying pressure.

This can happen when a stock has a large number of short sellers who are betting against the company's success. MicroStrategy, a business intelligence firm, has been at the center of a recent short squeeze. The company has been aggressively buying Bitcoin, which has driven up its stock price.

As the stock price rises, short sellers scramble to cover their positions, buying up shares to return to the market. This buying pressure can fuel further price increases, creating a vicious cycle.

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MicroStrategy's stock has seen a significant price increase since 2020, rocketing from about $12 to over $300 per share, a 25x price increase.

The company's CEO, Michael Saylor, has faced criticism for his strategy of investing in Bitcoin, but many investors agreed with his bet and put their money behind it.

MicroStrategy's stock first rocketed up from $12 to $103 in early 2021, as Bitcoin moved roughly 10x in March of that year.

Short sellers thought the stock was badly overvalued and bet against it, but they lost as MicroStrategy's stock dropped 60% from February to May of 2021, and then declined another 64% by mid-2022.

In August 2022, MSTR shares rallied 14% despite a $917.8 million impairment charge on Bitcoin holdings, potentially due to short sellers covering positions after a record 51% of shares were shorted.

This event was speculated to be a short squeeze, as bearish bets were crowded during a crypto downturn.

By the end of 2022, the stock was trading at just over $14, a bit more than it started the 2020s at.

The stock then rallied from $14 to $28 per share as short sellers began to cover their bets, wiping out a lot of the gains short sellers had made.

As of the start of 2025, short interest in the company sat at just 12-15% of the float.

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MicroStrategy has a 300% premium to Bitcoin, which may be unsustainable in the long run.

The company's average cost of Bitcoin is $49,874, and the current floating profit is close to 100%, providing a thick safety cushion.

MicroStrategy has a lot of time to repay its debt, with the nearest repayment date in 2027, more than two years away.

MicroStrategy's high short interest of 19.55% as of Dec. 31 supports the possibility of a short squeeze.

The cost-to-borrow (CTB) fee for MicroStrategy is just 0.48%, which is relatively low compared to the average stock CTB fee of between 0.3% and 3%.

Short sellers have wavered this year as MicroStrategy stock skyrocketed 469% over the past six months.

Several institutions are still holding out for a decline in the stock price of MicroStrategy, with $6.9 billion in major short positions.

The short-interest ratio for MicroStrategy's stock has decreased by nearly 50% over the last six months, from 3.1 days to 1.5 days.

A lower short-interest ratio indicates less short-seller interest, making a short squeeze less likely.

Despite some institutions betting on a MicroStrategy fall, the stock has rallied since December 2023, when it started at $570 and has since tripled to $1,656.

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MicroStrategy's short interest is currently around 15%, which is not high enough for a short squeeze to happen today. This is because shorts can easily exit their positions without significantly impacting the stock price.

A short squeeze typically requires a short interest of at least 20% of the public float. For now, that's not the case with MicroStrategy.

Several institutions are still holding out for a decline in the stock price, with $6.9 billion in major short positions. This is a significant amount, but it's worth noting that the short-seller confidence has decreased by nearly 50% over the last six months.

The short-interest ratio for MicroStrategy's stock has decreased from 3.1 days to 1.5 days, indicating less short-seller interest. This is a good sign for the stock, as it suggests that shorts are less likely to be squeezed out.

MicroStrategy's stock has rallied significantly since December 2023, tripling in value to $1,656. This has made it more difficult for short-sellers to maintain their positions.

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