Market News

Short Sellers of Crypto Stocks Get Squeezed

We all know that the cryptocurrency market, in general, has been wildly unstable. However, based on several stocks in the sector—particularly Coinbase (NASDAQ:COIN) and Silvergate Capital (NASDAQ:SI)—it’s starting to look like a short squeeze is already in progress. In fact, some unpleasant comparisons to GameStop (NYSE:GME) are currently emerging.

Both Coinbase and Silvergate Capital are down in today’s trading, but that wasn’t the case recently. Silvergate Capital spiked just yesterday after news emerged about State Street (NYSE:SST) buying in heavily. However, subsequent news about a DOJ investigation into Silvergate sent it back down. Conversely, Coinbase is up over 120% on a year-to-date basis, with Silvergate up 60% just since the end of last week. Similar trends were already spotted with MicroStrategy (NASDAQ:MSTR) and Riot Platforms (NASDAQ:RIOT).

The notion that all these companies are seeing short squeezes may not be that out of line. Already, reports suggest that Silvergate’s CEO, Alan Lane, sold all of his stock back in July. As of today, he’s bought none to replace it. Crypto prices have declined since the highs seen back in November 2021. Troubles from regulators and investors alike are on the rise. Shorting stocks in such an environment looks attractive, but the sheer volatility of the field makes such a move risky these days.

Of the four stocks potentially facing a short squeeze, only one—Riot Platforms—isn’t considered a Hold by Wall Street. Analyst consensus actually considers Riot stock a Strong Buy. It also has the strongest upside potential at 41.67%, thanks to an average price target of $9.69. Meanwhile, Coinbase’s average share price of $52.21 gives it 30.04% downside potential.


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