Jim Chanos, the famed short-seller known for predicting the collapse of Enron, is now targeting the Bitcoin treasury company Strategy. According to his recent post on the X social platform, Chanos believes the firm’s market value is unjustifiably inflated by a premium far above its actual Bitcoin holdings.
According to him, company valuation is more a function of speculation than fundamentals. Strategy has amassed a lot of Bitcoin, whereas Chanos opines that investors are paying above the net asset value and thinks that the latter will shrink in the near future.
The hedge fund manager has supported his status by taking a short on Strategy. Simultaneously, he made sure to hedge his bets by purchasing Bitcoin directly, indicating that, technically, he has a problem with the penetration of stocks by companies selling them on equity hype but not with the digital currency itself. He cited the increased popularity of Bitcoin exchange-traded funds as more effective entities.
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Jeff Walton, a high-profile Strategy supporter, in turn justified the firm’s course of action. According to him, Strategy will use Bitcoin as collateral to gain access to cheap capital, which will enable it to expand even more. Walton pointed out, too, that the amount of capital that Strategy controls now is eight times that which Chano’s firm ever did.
Rising Tensions Between Bitcoin Advocates and Market Skeptics
Michael Saylor, who co-founded Strategy, responded to Chanos’s bet with a strong warning. He suggested that if Strategy shares continue to rise, Chanos could face a forced liquidation of his position. The public challenge further escalated when Simon Gerovich, CEO of Japan’s Metaplanet, urged Chanos to bet against his company too.
Active shorts seller Chanos, whose business model is built around shorting high-profile companies, lost a fortune in his short position at Tesla. In 2020, he acknowledged that that trade was indeed an expensive error. Now that he is focusing on Chanos and Strategy, he is up against another company that enjoys the favor of retail investors, as well.
There is also now a wider range of institutional options to gain exposure to Bitcoin, and this could put the premium on companies such as Strategy under future pressure. The validity of the warning Maggots show on the Chanos part of the equation may be hinged on how long the market conditions remain to make equity plays and favor direct investments in digital assets.
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