Metaplanet Encounters Significant Short Squeeze as Bitcoin Investment Surprises Skeptics

A significant financial situation is unfolding globally as Metaplanet Inc., the foremost Bitcoin treasury firm in Asia, has become the most heavily shorted stock in Japan.

According to insights from CEO Simon Gerovich shared on X, over a quarter of Metaplanet’s shares have been borrowed for short selling, suggesting the potential for a short squeeze reminiscent of the GameStop scenario, but this time driven by Bitcoin.

Bitcoin Strategy Fuels Exceptional Growth

Metaplanet’s rapid transformation from a hospitality provider to Japan’s largest corporate Bitcoin holder has garnered both support from Bitcoin enthusiasts and skepticism from institutional investors.

On May 18, the company announced a record revenue of ¥877 million ($6 million) for the first quarter, with an impressive 88% derived from its Bitcoin-focused strategy.

It has also quadrupled its Bitcoin holdings since January, with a recent acquisition of 1,004 BTC totaling over $104 million, bringing its total to 7,800 BTC worth more than $800 million. On the same day, Michael Saylor’s firm reported a purchase of 7,390 BTC, increasing its total to 576,230 BTC.

However, rather than increasing investor optimism, the shift towards cryptocurrency has triggered a surge in short interest. Rising Japanese bond yields, particularly the 30-year JGB reaching 3.14% on May 20, appear to have fueled bearish sentiments toward riskier assets like Metaplanet.

In the past week, shares of the company fell by 12.84%, indicating initial success for short sellers. Yet, they may have misjudged the momentum from retail and institutional investors, with a reversal in trend potentially on the horizon.

Short Squeeze Potential Grows

In just two days, the price of Metaplanet’s shares surged to their daily limit, leading to trading halts, with shares closing at ¥933 on May 21. These interruptions, enforced by circuit breakers on the Tokyo Stock Exchange, have hindered short sellers from liquidating their positions, creating a scenario that could lead to a gradual squeeze.

Bitcoin advocates are rallying around Metaplanet, comparing it to the 2021 GameStop incident, though highlighting that this situation is underpinned by Bitcoin rather than the excitement of a meme stock.

“Metaplanet MTPLF will be the GME of 2021,” tweeted analyst Chicken Genius, emphasizing its foundation in Bitcoin’s stability.

On May 20, CEO Gerovich noted a rise in the company’s OTC listing ranking, now placing third in dollar volume and fourth in transactions among over 12,000 firms.

What enhances this current situation is Metaplanet’s tactical approach. As observed by community member Macrocomics, the company employs a put-selling strategy on Bitcoin futures, allowing it to acquire Bitcoin at lower prices or generate additional revenue for further acquisitions, thus enhancing its Bitcoin yield without incurring debt.

While short sellers might consider the firm overstretched, its underlying business strengths and market sentiment suggest otherwise.

“Imagine trying to short Metaplanet on the TSE and being unable to close out your positions for two days due to limit-up halts,” cautioned an X user.

With the stock tightly locked within limit-up prices, traders anticipate another surge once trading resumes. Should retail investors participate in the rally similarly to the GameStop scenario, the short squeeze could escalate, compelling short sellers to cover at increasingly higher market prices.