UpdatesDec 09, 2023

Traders shorting Bitcoin are losing billions as the BTC price refuses to fall

Cryptocurrency investors who expect the sector to decline suffer significant losses.

According to data provided by the popular firm S3 Partners, short-term investors who focus on companies related to the oldest cryptocurrency suffered significant financial losses exceeding $6 billion in total by trying to short BTC in 2023. These losses were caused by a sudden but consistent reversal of the bearish trend on the Bitcoin chart , as well as the oldest cryptocurrency regaining key price levels.

Traders have lost a fortune shorting Bitcoin-related companies

Based on a report published by the analytical company S3 Partners, traders who at the beginning of 2023 adopted a bearish stance towards listed cryptocurrency companies such as Coinbase, Marathon Digital and MicroStrategy recorded losses of $6.05 billion.

Due to the long-term increasing value of digital currencies, many investors taking short positions on shares of companies related to the crypto industry have made significant losses.

In just the first three quarters of 2023, some short-term investors reduced their exposure to cryptocurrencies as the sector apparently rebounded. However, since Bitcoin's last low of $25.1K in September 2023, there has been a sustained and sharp increase in short selling totaling approximately $697 million as traders dramatically increased their exposure to what they perceived as an "overbought market." .

In a sudden turnaround in the stock market, BTC experienced a significant increase in value and reached a new yearly high of over $44,300 on December 5 this year. This unexpected upward rally resulted in approximately $2.65 billion in losses for short-term investors.

Strong increases in the value of BTC-related enterprises

Undoubtedly, this year's increases in share prices of companies such as Coinbase and MicroStrategy may have been a challenge for many traders who were betting on shorting these shares. For the Brian Armstrong-led company, this year's 290% stock rally has resulted in losses estimated at about $3.5 billion for short-term traders. It is worth adding that this currently constitutes more than half of the total losses incurred in this way throughout 2023.

Additionally, MicroStrategy's over 300% growth this year contributed to roughly $1.4 billion in losses for cryptocurrency traders. Despite the current strong growth in the market for digital currencies and related companies, some investors still decide to take short positions, most likely hoping that the upward rally will lose momentum at some point.