Strategy (MSTR.US) has become the stock with the largest short position in the US stock market, arbitrage trading has emerged.

According to data from FactSet and Goldman Sachs Group, Inc., billionaire Michael Saylor's company Strategy (MSTR.US) as a significant holder of Bitcoin, its stock is being heavily shorted, a market term referring to a strong bet on a continued decline in stock price. However, some analysts point out that this position may not necessarily reflect investors' expectations of a continued drop in stock price. According to a report released by Goldman Sachs Group, Inc. last week, based on the indicators tracked in the report, Strategy (MSTR.US) has a put short position equivalent to 14% of its market value of $34 billion at the time, making it the stock with the highest short ratio in the report. At the same time, cryptocurrency exchange Coinbase (COIN.US) ranked fourth with an 11% short position. The report tracks the dynamics of stock holdings of companies with market values exceeding $25 billion. This shorting trend is happening as Strategy's Bitcoin holdings have incurred unrealized losses of around $7 billion. Since adding Bitcoin to its balance sheet in 2020, the company has accumulated 717,722 bitcoins, currently valued at around $47 billion. As of the time of writing, its market value is approximately $44.52 billion, despite a cumulative 12% decline in stock price this year. Meanwhile, Bitcoin, after reaching a peak of $126,080 per coin on October 6, was trading at $66,653.26 per coin at the time of writing. Analysts attribute the increase in short positions to the basis trading strategy - a strategy that profits by capturing the price difference between two related markets. In practice, traders can buy Bitcoin spot ETFs (such as BlackRock, Inc.'s IBIT) and short Strategy stock simultaneously, arbitraging when the premium of Strategy relative to its Bitcoin holdings narrows. By overlaying paired futures contracts, additional funding rate returns can be obtained while maintaining a neutral position in the market. Bitcoin financial company expert Brian Brookshire pointed out: "I suspect that a large amount of short positions still originate from MSTR/BTC basis trading. In particular, top market maker Jane Street recently established an unusually large IBIT position." According to the latest 13F institutional holding filings, Jane Street has purchased over 7 million shares of BlackRock, Inc.'s iShares Bitcoin Trust (IBIT), while also holding a significant position in Strategy stock at the time. It is worth noting that Anchorage Digital co-founder and CEO Nathan McCauley disclosed on February 25 that the digital bank has allocated Strategy's perpetual preferred stock STRC (STRC.US) on its balance sheet.