Crypto Giants MicroStrategy (MSTR) and Coinbase (COIN) Emerge as Wall Street’s Prime Short Targets

A recent analysis by Goldman Sachs Research reveals that two prominent players in the cryptocurrency space, Bitcoin whale MicroStrategy (MSTR) and the leading US crypto exchange Coinbase (COIN), have become the focus of Wall Street’s bearish sentiment, attracting significant short interest.

Short Sellers Circle Crypto Leaders

Among large-cap companies with a market capitalization exceeding $25 billion, MicroStrategy and Coinbase stand out for their high “short interest” – the proportion of outstanding shares held by short sellers yet to be covered. MSTR leads the pack with a staggering 14% short interest, securing the top spot on the “most shorted” list, while COIN follows closely at 10%, ranking fourth. This data underscores a pronounced skepticism from a segment of institutional investors regarding their future performance.

Matt Hougan, Chief Investment Officer at digital asset management firm Bitwise, succinctly captured the polarized market view, stating, “Cryptocurrency is like cilantro; those who like it can’t get enough, while those who hate it scoff.” He acknowledged that the intense shorting activity targeting MSTR and COIN is hardly surprising given the inherently divisive nature of the crypto market.

Underperformance Amidst Bearish Pressure

Despite no significant shifts in institutional holdings for MSTR and COIN during Q3 and Q4, Goldman Sachs’ hedge fund data through the end of 2025 indicates these heavily shorted stocks have been among the weakest performers in their respective categories. This suggests that the bearish bets have, to some extent, paid off for short sellers.

MicroStrategy’s stock, for instance, saw a 1.66% decline on Thursday, settling around $133. Over the past six months, MSTR has plummeted by approximately 60%. This downturn is primarily attributed to Bitcoin’s sharp correction from its October peak of $126,000, now trading around $68,000 – a more than 45% drop. As the world’s largest corporate holder of Bitcoin, MicroStrategy’s financial health and stock performance are inextricably linked to the cryptocurrency’s price movements. The recent decline has led to an estimated $5.3 billion in unrealized losses on the company’s balance sheet.

MicroStrategy’s Bitcoin Holdings Under Scrutiny

Market pessimists are increasingly questioning whether sustained pressure on MSTR’s stock price could escalate the company’s financial woes, potentially forcing it to liquidate some of its substantial Bitcoin holdings to service debt. Such a move, they argue, could trigger a broader sell-off in the crypto market. While MicroStrategy established cash reserves last December to cover dividends, it has not definitively ruled out the possibility of selling Bitcoin if circumstances necessitate it.

“Shorting MSTR has been a popular trade in the market for the past few years,” Hougan observed. He highlighted that many institutions are engaging in sophisticated arbitrage strategies, such as “long Bitcoin, short MSTR” or “long convertible bonds, short common stock.” While these strategies are often rational, Hougan cautioned that some short sellers might misunderstand MicroStrategy’s balance sheet. “Some mistakenly believe that if Bitcoin falls below the company’s average purchase price, Strategy will face bankruptcy risk. This interpretation is incorrect, and shorting based on this reason could ultimately prove costly,” he warned.

Michael Saylor, founder and executive chairman of MicroStrategy, has consistently defended the company’s position, asserting its resilience even if Bitcoin were to fall to $8,000.

Coinbase Navigates Broader Market Headwinds

Coinbase, despite its diversified business model not solely reliant on Bitcoin, has also suffered significantly, with its stock price dropping approximately 40% over the past six months amidst a general crypto market downturn. The company’s recent Q4 earnings fell short of expectations. However, analysts at Wall Street firm Bernstein noted that when COIN’s stock price approached $167, it became “too cheap to sell.” On Thursday, COIN’s stock closed down 1.57% at $181.06, a significant distance from its 52-week high of $444.

The intense short interest in MicroStrategy and Coinbase underscores the ongoing debate and inherent volatility surrounding the crypto market. While some investors see significant downside, others view current valuations as an attractive entry point, setting the stage for continued market contention.