Tom Lee Says Institutions Short MicroStrategy to Hedge Against Bitcoin Plunge

(Seoul=Yonhap Infomax) Jang Won Lee Senior Reporter = Institutional investors are reportedly shorting shares of MicroStrategy Inc. (NASDAQ: MSTR), the largest corporate holder of Bitcoin, to hedge losses in the cryptocurrency market.

According to CoinDesk on the 23rd (U.S. local time), Tom Lee, founder of Fundstrat and chairman of Bitmine Immersion Technologies (AMS: BMNR), said in a recent interview with CNBC, "When institutional investors seek hedging options for losses in Bitcoin or Ethereum, there is a lack of sufficiently liquid crypto derivatives." He explained, "As a result, investors are shorting MicroStrategy shares to offset the risk of their long crypto positions in their portfolios."

He added, "MicroStrategy is currently the most important stock to watch."

MicroStrategy, which has adopted a Bitcoin-focused treasury strategy, currently holds approximately 650,000 Bitcoins, and its share price is closely correlated with Bitcoin's price movements.

Lee emphasized, "MicroStrategy is absorbing all the hedging pressure that the crypto industry is attempting to protect long positions."

This selling pressure is cited as the main reason MicroStrategy's share price has dropped 43% over the past month.

Lee argued, "The liquidity and depth of native crypto hedging tools (risk management using the intrinsic characteristics of assets or ecosystem tools) are insufficient," adding, "Investors with large Bitcoin long positions have limited ability to hedge effectively using crypto derivatives."

Therefore, he stressed, institutions are using the highly liquid options market for MicroStrategy shares as an alternative route to manage crypto-related risks.

Lee analyzed that this phenomenon is linked to the large-scale liquidation event on the 10th of last month, which delivered a $20 billion shock to the market.

He diagnosed that market makers, who act as the 'central banks of crypto,' were hit hard, paralyzing their liquidity provision function and exposing structural vulnerabilities in the crypto market.

jang73@yna.co.kr

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