Veteran investor Jim Chanos, known for his successful short positions like Enron, has publicly revealed an arbitrage strategy involving MicroStrategy (MSTR) and Bitcoin (BTC). During interviews on CNBC and at the Sohn Investment Conference, Chanos explained that he is short-selling MicroStrategy stock, which has surged over 3,500% in five years to a $115 billion valuation, while simultaneously buying Bitcoin directly.
Chanos criticized the extreme bullishness in MicroStrategy’s stock price compared to Bitcoin’s performance, calling the company’s valuation illogical and inflated due to retail speculation. He stressed that investors should seek direct exposure to Bitcoin rather than indirect exposure through institutional proxies like MicroStrategy. According to him, this strategy is akin to buying Bitcoin for $1 and selling MicroStrategy stock at $2.50, highlighting a perceived overvaluation of MSTR relative to BTC.
MicroStrategy’s massive Bitcoin holdings, about 568,840 BTC purchased at an average price of $69,287, have caused its shares to behave as a leveraged bitcoin proxy, making the stock sensitive not only to Bitcoin’s price movements but also to investor risk appetite. While Bitcoin has gained approximately 70% over the past year, MicroStrategy shares have risen over 220% in the same timeframe, reinforcing Chanos’s view that MSTR stock is overvalued and vulnerable to correction.