Strategy Short Sellers Face $3.3B Squeeze as MSTR Surges on Bitcoin Tailwinds

Short sellers betting against (Micro)Strategy (MSTR) are facing estimated paper losses of more than $3.3 billion as the stock stages a sharp recovery alongside Bitcoin’s return to $69,000. The enterprise software firm, which effectively functions as a leveraged Bitcoin treasury under Chairman Michael Saylor, has seen its share price rebound to approximately $135, punishing bearish investors who accumulated positions during the company’s recent decline.

Strategy tops the list of the 50 most-shorted companies with market capitalizations exceeding $25 billion. Bearish investors have sold short approximately 14% of the company’s float, totalling roughly $6 billion in short positions.

This aggressive positioning indicates a market betting heavily on the compression of the “Bitcoin Premium,” the value at which MSTR trades relative to its underlying Bitcoin holdings.

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 A Classic Short Squeeze Scenario

Strategy recently reported significant unrealized losses during the crypto winter lows, a factor that emboldened short sellers to increase their positions.

The surge has triggered a classic Short Squeeze scenario for the Virginia-based company, which currently holds the distinction of being the most shorted large cap stock in the US. With Bitcoin price action acting as the primary catalyst, the rapid appreciation in MSTR shares is forcing short sellers, who borrowed stock to sell in anticipation of lower prices—to buy back shares at a premium to cover their positions, further fueling the rally.

Hedge funds have increased their exposure to the crypto sector amidst this volatility, but the concentration of short positions in MSTR suggests a specific skepticism toward the company’s valuation model rather than Bitcoin itself. While just 63 hedge funds own Strategy stock, representing only 3% of equity, the short side is crowded. This imbalance has created a perilous environment for bears as inverse ETFs and bearish bets climbed to record levels following the stock’s 50% correction from its October 2025 highs.

MSTR Eyes $165 Resistance

Strategy recently reported significant unrealized losses during the crypto winter lows, a factor that emboldened short sellers to increase their positions. However, the structure of its convertible debt allows the company to hold its position without forced liquidation, maintaining high conviction through volatility. Saylor recently hinted at the company’s ongoing accumulation, signaling that the firm intends to continue raising capital to defend and expand its holdings regardless of short-term price action.

From a technical perspective, MSTR’s recovery to $135 marks a critical pivot point. The stock had previously found support near the $119 level, a zone that aligned with peak bearish sentiment according to market data. Traders are now monitoring the $139 level; a clean break above this resistance could open the path toward $165-$190, potentially exacerbating the squeeze on remaining short positions.

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