Jim Chanos’ Crypto Bet: Buy Bitcoin (BTC) with Short Strategy (MSTR)

Jim Chanos, a seasoned investor known for his short selling of Enron, is now engaged in a strategy involving bitcoin (BTC) while simultaneously shorting MicroStrategy (MSTR), recognized as the largest corporate holder of the cryptocurrency.

During a discussion at an investment conference in New York, Chanos elaborated on his investment approach. He stated, “We’re offloading shares of MicroStrategy while acquiring bitcoin,” describing it as an arbitrage opportunity: “Essentially purchasing something for $1 and selling it for $2.50.”

MicroStrategy began its bitcoin purchases back in 2020, positioning itself as a proxy for investors interested in bitcoin. The company has raised capital through both debt and equity to fuel its bitcoin acquisitions, amassing a total of 568,840 BTC at an average purchase price of $69,287 per coin.

This heavy accumulation of bitcoin, which has garnered support from Wall Street analysts, makes MicroStrategy’s stock not only responsive to fluctuations in bitcoin’s market value but also to broader risk appetites among investors. Over the past five years, the company’s shares have soared by 3,500%, now priced at $416 each, translating to a market capitalization of $115 billion.

To Chanos, the current valuation of MicroStrategy seems illogical, with its stock experiencing larger increases compared to the bitcoin price itself.

The fund manager posits that the rise in MSTR shares is more indicative of retail speculation rather than underlying fundamentals, a notion he believes resonates with other companies seeking to copy MicroStrategy’s strategy of bitcoin accumulation.