Coinbase short-sellers lose $234 million in one day as shares surge following BlackRock tie-up
- Coinbase short-sellers lost more than $230 million on Thursday as the company's stock price soared.
- The crypto exchange announced a tie-up with BlackRock, the world's biggest asset manager.
Data company S3 Partners said Coinbase short-sellers were at one point down more than $1 billion on Thursday as the stock surged more than 40%.
S3 said so-called mark-to-market losses amounted to $324.2 million by the time the market closed, with Coinbase stock finishing 10% higher. The crypto exchange was last up another 11% on Friday.
Short-selling is one method of betting against a company's stock. To sell shares short, investors borrow them and sell them, hoping to buy them back later for less money and pocket the difference.
Coinbase is one of the most wagered-against companies on the US stock market, with more than 20% of its outstanding shares currently sold short, according to S3 partners.
The crypto exchange has tumbled dramatically this year as investors have dumped both digital assets and technology stocks as the Federal Reserve has rapidly raised interest rates.
Coinbase rallied sharply on Thursday, however, after it announced it was partnering with BlackRock to give the asset manager's institutional clients easier access to cryptocurrency trading.
The exchange's stock finished 10.01% higher at $88.90 a share. It remained more than 60% lower for the year, however.
Although Coinbase short-sellers are sitting on strong profits after the stock's dramatic fall this year, their gains have been trimmed in recent weeks as equity markets have bounced, driving talk of a so-called short squeeze.
"COIN was a solid squeeze candidate even before today's price pop," said S3 Partners analyst Ihor Dusaniwsky. "But [Thursday's] move makes it a certain squeeze stock for many short sellers that have incurred significant mark-to-market losses over the last thirty and seven days."
S3 said Coinbase short-sellers were up roughly $700 million on their bets against the company in 2022, even with the losses in August factored in.
In August, short-sellers had lost $767 million as of Thursday after a rebound in the company's shares, S3 said. To realize their profits or losses, investors would have to cash out of their bets.
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