Bitcoin Treasury Stocks May Be Poised for Rebound as Short Sellers Exit MSTR
The prolonged downturn in Bitcoin treasury stocks might finally be nearing its conclusion, as recent market activity suggests a potential shift in sentiment. A notable indicator of this change came when prominent investor James Chanos, founder of Kynikos Associates, announced that his firm had closed its short position against MicroStrategy (MSTR), a company widely known for its substantial Bitcoin holdings. This strategic move has sparked speculation that the sector has found its bottom and may soon recover.
Chanos revealed that his firm exited the short position on MSTR and also liquidated a long position in Bitcoin itself at the start of trading last Friday. The decision follows a significant decline in Strategy’s market Net Asset Value (mNAV), which has dropped from approximately 2.0x in July 2025 to just 1.23x, indicating that the bearish case had largely played out.
MicroStrategy, led by Bitcoin advocate Michael Saylor, has seen its shares decline roughly 50% from their 2025 peak. The company’s implied premium—calculated as its enterprise value minus the value of its Bitcoin reserves (currently at 641,205 BTC)—has shrunk from about $70 billion in mid-2025 to $15 billion, suggesting a more reasonable valuation.
Chanos emphasized that while there could be further mNAV compression, especially if the company issues more equity, “the thesis has largely played out.” His exit from the trade is viewed by some as a potential inflection point. Pierre Rochard, CEO of The Bitcoin Bond Company, interpreted the move as a signal that the treasury stock bear market may be winding down.
The broader landscape for companies holding Bitcoin on their balance sheets has been challenging. Approximately 200 publicly traded firms have integrated Bitcoin into their treasuries, but many have suffered significant valuation declines. MicroStrategy has borne the brunt of these losses, with its market capitalization falling by over 43% from $122.1 billion in July to $69.5 billion.
Metaplanet, a Tokyo-listed company that had shown strong performance earlier in 2025, also saw a dramatic downturn. Its market cap has plummeted by 56% since June 21, reflecting the broader pressure facing Bitcoin-centric corporate strategies.
Some firms have even been forced to liquidate portions of their Bitcoin holdings to manage outstanding financial obligations, underscoring the risks of heavy crypto exposure during volatile periods.
However, broader macroeconomic developments could provide relief. One of the major drags on the crypto market—political gridlock in the United States—showed signs of resolution. Over the weekend, reports emerged that the U.S. Senate had reached a deal to pass budget legislation, effectively ending a government shutdown. Following the news, Bitcoin’s price jumped 2% within an hour, climbing to $106,430, illustrating how macro stability can rapidly reinvigorate market confidence.
In addition to the stabilization of Bitcoin prices, other factors could support a rebound in Bitcoin treasury stocks:
1. Institutional Confidence Returning:
With short sellers beginning to exit positions and macroeconomic uncertainty easing, institutional investors may regain confidence in companies with Bitcoin-based strategies.
2. Valuation Reset Creates Opportunity:
The steep decline in share prices of Bitcoin treasury firms has reset valuations, potentially making these stocks more attractive to value-oriented investors.
3. Regulatory Clarity on the Horizon:
There are increasing calls for clearer regulatory frameworks for crypto assets. Progress in this area could reduce the perceived risk of holding or investing in Bitcoin-tied corporations.
4. Bitcoin ETF Momentum:
The push for spot Bitcoin ETFs has gained traction globally. Approval and launch of such products could enhance liquidity and institutional access to Bitcoin, indirectly benefiting companies like MicroStrategy.
5. Stronger Correlation Between Bitcoin and Treasury Stocks:
Historically, the performance of Bitcoin treasury stocks has tracked Bitcoin itself. If Bitcoin resumes an upward trajectory, firms with large holdings could see their share prices follow suit.
6. Strategic Adjustments by Companies:
Some Bitcoin treasury companies are reevaluating their strategies—diversifying operations, integrating blockchain-based services, or managing debt more prudently. These shifts could improve investor sentiment over time.
7. Retail Investor Re-engagement:
Retail investors, who played a significant role in the 2021 crypto bull market, may return to the market if they perceive that the worst is over for Bitcoin and related equities.
8. Potential for Mergers and Acquisitions:
As valuations drop, some firms may become attractive acquisition targets for larger players looking to gain Bitcoin exposure or expand into the crypto sector.
9. Resilience of Bitcoin as a Store of Value:
Despite volatility, Bitcoin continues to be viewed by many as a hedge against inflation and currency debasement. This narrative could strengthen the case for corporate Bitcoin holdings in the long term.
10. Improved Financial Transparency:
Companies like MicroStrategy are under pressure to improve financial disclosures, especially regarding their Bitcoin acquisition strategies. Enhanced transparency could help rebuild investor trust.
In summary, the exit of a high-profile short position against MicroStrategy may signal a turning point for Bitcoin treasury stocks. While challenges remain, a confluence of technical, macroeconomic, and strategic factors suggests that the worst of the bear market could be behind us. Investors will be watching closely to see whether this marks the start of a sustained recovery or simply a temporary reprieve.