Jim Chanos Is Betting Against MicroStrategy (MSTR) While Spotlighting Bitcoin (BTC)

Jim Chanos, the veteran investor who made his name shorting Enron, is betting on bitcoin (BTC) trade while shorting Strategy (MSTR)

Jim Chanos, the veteran investor known for his short bets on Enron and the housing bubble, is turning his attention to bitcoin (BTC) and Strategy (MSTR), the largest corporate holder of the biggest cryptocurrency.

In an interview at the Sohn Investment Conference in New York with CNBC on Wednesday, Chanos described a bet he’s making by shorting Strategy and buying bitcoin.

“We’re selling MicroStrategy stock and buying bitcoin, which is, in essence, an arbitrage move. It’s basically buying something for $1, selling it for $2.50.”

Strategy began accumulating bitcoin in 2020 as part of a broader narrative shift to a bitcoin proxy for investors. The firm has issued debt and equity to purchase the cryptocurrency, and it now holds a 568,840 BTC treasury bought at an average cost of $69,287 per coin.

The company’s aggressive bitcoin accumulation, backed by the bullish calls from Wall Street analysts, has made its stock very sensitive not only to bitcoin’s price but also to investor risk appetite.

Strategy’s shares have soared 3,500% in the last five years to now trade at $416 apiece, giving it a $115 billion market capitalization. But to Chanos, that valuation doesn’t add up.

“I think it’s a short. They’ve sold a lot of stock and they’re going to sell more stock. I’m not a big short-seller but I like this one a lot.”

Chart of Strategy stock price vs bitcoin price in 2024highlight

Strategy’s stock price has surged more than the price of bitcoin this year.

To Chanos, Strategy’s valuation doesn’t make sense as MSTR shares have surged more than the price of bitcoin.

The fund manager argues that this rise reflects retail speculation more than fundamentals, a theme he believes is being carried forth by other firms who are now trying to replicate MicroStrategy’s bitcoin accumulation strategy.