Journalist
Posted:
Despite the recent recovery, capitulation risks have not yet completely disappeared.
In fact, the biggest risk still appears to be institutional in nature. Although Bitcoin [BTC] has stabilized, Strategy [MSTR] continues to trade 70% below Q3 2025 levels, underlining continued pressure on balance sheets.
As a result, unrealized losses remain material. Based on current estimatesMSTR is facing approximately $6 billion in unrealized losses across its 717,000 BTC positions, acquired at an average cost of $76,000. That’s about 11% above BTC’s current spot price.
Source: FactSet
Against this setup, traders’ positioning around MSTR is starting to make sense.
As the chart above illustrates, Strategy has now become the most shorted stock on the market. The net short position is almost $4.85 billion, which represents about 10-11% of the total market capitalization.
Simply put, the market is trending bearish. Increased short interest in MSTR suggests traders are positioning themselves for further declines even after the stock’s 70% decline. From a technical perspective, this bias is not entirely unreasonable, as the structure remains vulnerable.
That said, the timing of this positioning is critical. If this Bitcoin recovery proves to be more than just a liquidation reset and instead confirms a continued bullish reversal, could it put further pressure on the MSTR shorts?
Record Short Interest in MSTR Meets Rising BTC Momentum
The market seems to be reappraising the crypto momentum.
After a week of speculation surrounding the alleged manipulation of Jane Street, the company was recently sued, prompting some… Analysts call a repricing moment, especially now that the immediate selling pressure has subsided.
The numbers back it up. Immediately after the news, BTC rose by $2,000, wiping out approximately $120 million worth of shorts in just 30 minutes. Altcoins followed suit, rising about 3% across the board, while MSTR rose 8.86%, marking the strongest single-day gain in more than a week.
Source: TradingView (MSTR/USDT)
In this setup the bears are clearly on the back foot.
Of institutional momentum gradually returning, the short-term Bitcoin short cluster (about $50 million in positions around $70,000) will likely become the main focus of the bulls, opening the door for BTC to move higher.
The result? MSTR, now approaching its resistance at $140, looks poised for a breakout. This is where record short interest becomes critical: as market momentum increases, these MSTR shorts are at increased risk of a downturn in pressure.
This in turn shows why MSTR’s BTC holdings are poised to expand in the second quarter.
Final summary
- With $6 billion in unrealized losses on 717,000 BTC and record short interest, MSTR is technically vulnerable.
- Recent gains in BTC put bears at risk, highlighting why MSTR’s BTC holdings are likely to grow further in the second quarter.