MicroStrategy and Coinbase have the most possibility of a short squeeze – or a rally spurred by short sellers getting out of their bearish bets – S3 Partners said in a report.
However, the trade has become so crowded that it primed these stocks for a short squeeze, said data analytics firm S3 Partners in aon Monday. A short squeeze is triggered when an unexpected rally in a stock price forces short sellers to unwind their bearish bets, leading to an even bigger jump. "These crypto related stocks are extremely crowded and very squeezable relative to the U.S. market, with an average Crowded score of 57.34 versus the street average of 32.41 and an average Squeeze score of 78.69 versus the street average of 34.41," the report said, adding that"MSTR, COIN and CLSK are the most squeezable names in the sector."The total short interest in crypto stocks is $10.
If a sector becomes too crowded with short sellers, such a trade can become dangerous if the share price of a shorted stock continues to climb, forcing investors to scramble to cover their shorts, leading to massive losses. In recent years, short squeezes in GameStop and Tesla led to disaster for short sellers.
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