Key Takeaways
Why are funds closing MSTR short positions?
They believe the statement has come true as mNAV is compressed nearly 1.0x.
How could the update affect the value of BTC?
Seller exhaustion allows bulls to enter for MSTR, and by extension, increase inflows into BTC.
Legendary Wall Street short seller James Chanos has closed his short position on MSTR (Strategy) stock, a trend that raises hopes of a possible recovery in Treasury inflows.
Chanos explained that his company went short MSTR and went long Bitcoin [BTC]after the company’s mNAV (market-to-net asset value) started shrinking last year. He added,
“It makes sense to hedge this trade at mNAV below 1.25x, after falling from ~2.0x in July 2025. While we still believe there is more room for mNAV compression, the thesis has largely come true.”
Source: Chano & Co
For context, mNAV measures how a company’s market value compares to its crypto holdings.
Higher numbers indicate rising demand for leveraged BTC exposure via MSTR and, by extension, overvaluation compared to equities.
However, this ratio has since fallen sharply from 3.4x to almost 1x, explaining Chanos’ decision to cover his shorts – a move typically considered bullish.
Will this improve BTC treasury inflows?
Kerrisdale Capital, another prominent short seller, made a similar bet against MSTR last year – as well as BitMine, the leading Ethereum [ETH] treasury company. Both cited inflated mNAVs and competition from Bitcoin ETFs as the core of their bearish theses.
Since reaching a high of $457 in July, the MSTR has fallen more than 51% to $219.68, which represents a windfall for bears like Chanos and Kerrisdale.
Source: MSTR vs BTC, TradingView
Still, now that the short positions are covered, analysts expect short-term relief for the MSTR and possibly also for BTC government bond inflows.
Pierre Rochard, CEO of the treasury Bitcoin Bond Company, noted,
“The Bitcoin Treasury bear market is gradually coming to an end. Expect continued volatility, but this is the kind of signal you want to see for a reversal.”
Government bond inflows are at a crossroads
During Bitcoin’s rally in late 2024 and mid-2025, inflows into Digital Asset Treasuries soared. For example, the weekly influx tripled from $2 billion to $6 billion by November 2024, according to DeFiLlama.
Source: DeFiLlama
However, after July 2025, inflows weakened from about $4 billion to $45 million. A 98% drop in demand from treasuries as they struggled with compressed mNAVs or the so-called ‘bear market’.
That said, recently MicroStrategy increased its euro-based STRE note offering from €350 million to €620 million for new BTC purchases.
Still, it remains unclear whether bulls will intervene at current MSTR levels to increase mNAV and revive government bond inflows into BTC.