Hedge fund profits by shorting Bitcoin stock MicroStrategy — but not Tesla
London-based hedge fund Argonaut Capital is up 50% in three months on its MicroStrategy short as it continues to bet against Bitcoin stocks.
Argonaut chief exec Barry Norris told City Wire last week he believes the recent crypto rallies are “unsustainable.”
So, Norris is leveraging Argonaut’s $49 million Absolute Return fund to bet against Bitcoin stocks like MicroStrategy.
Norris then said Argonaut holds short positions in a number of crypto companies including Coinbase — the largest US digital assets exchange.
Coinbase made history in April as the first crypto exchange to list on public markets.
- MicroStrategy currently holds 92,079 BTC ($4 billion).
- MicroStrategy stock is down over 60% from its February peak.
- Coinbase stock has fallen nearly 30% since its April top.
“These are two of the biggest, most liquid plays on crypto in the equity world,” said Norris (via FN).
“[MicroStrategy is] just a very leveraged play on Bitcoin and should trade at a significant discount to its net-asset value.”
Norris unfortunately didn’t specify the dollar value generated by shorting Bitcoin stocks like MicroStrategy.
As for Coinbase: Argonaut’s $COIN short is just a few weeks old but Norris said it’s already “in the money.”
Norris did however note that Argonaut’s shorts — encompassing markets other than crypto — would equal 1.5% of the related fund’s portfolio.
This would make Argonaut’s original short position in MicroStrategy worth around $750,000.
Tesla is a Bitcoin stock but Argonaut won’t short it
Electric vehicle kingpin Tesla added $1.5 billion in Bitcoin to its balance sheet earlier this year.
Argonaut won’t be shorting Tesla anytime soon, even if wields the ‘Bitcoin stock’ moniker.
Norris told reporters Tesla’s short market is “too crowded” for that gamble.
[Read more: Chia crypto triggers HDD stock rally as Western Digital, Seagate surge]
Norris could be alluding to filings on Monday which revealed famed short-seller Michael Burry now holds a $534 million Tesla short.
Burry gained notoriety after spotting the looming financial crisis in 2008, profiting big by betting against shaky sub-prime mortgages.