Legendary investor calls for "shorting MicroStrategy, going long on Bitcoin," as crazy arbitrage ideas ignite debate on Wall Street over encryption valuation.

Legendary investor Jim Chanos has adopted a strategy of both long Bitcoin and short MicroStrategy, pointing to the fact that his proxy stock premium stems from speculation, which has caused the market to ponder the valuation model of cryptocurrency-related assets. (Synopsis: Trump admits for the first time that "tariffs will hit the economy": less unacceptable interference, can make America great again MAGA) (Background added: Moody's warns: Trump's tariffs & immigration policies may cause the United States to fall into "stagnant inflation", Fed will be forced to raise interest rates) Legendary investor Jim Chanos once again attracted global attention with his unique perspective, revealing to the audience a trading strategy he is betting on at the recent Sohn Investment Conference in New York. That is, MicroStrategy, which is widely regarded as a bitcoin "proxy stock" at the same time, believes that MicroStrategy's current stock price is moisture and high, with a lot of speculative elements, which has sparked widespread discussion on Wall Street. Arbitrage Theory According to CNBC, Chanos elaborated on his logic for this "pair trade" in an interview at the Sohn Investment Conference in New York. He noted that MicroStrategy's high premium stems mainly from speculation by retail investors and the market's over-pursuit of the company's use of leverage, i.e., debt, to acquire bitcoin. Chanos has been more vocal in his criticism of other attempts to replicate the MicroStrategy model, selling the concept of buying bitcoin within a company's structure to retail investors, calling the idea "ridiculous." MicroStrategy bubble outpaces bitcoin gains Jim Chanos mentioned the valuation error of his enterprise software company MicroStrategy, and under the leadership of founder Michael Saylor, MicroStrategy actively issued a large amount of corporate debt to invest in bitcoin and put it on the balance sheet, making it the world's largest public company holding bitcoin, holding up to 553,555 bitcoins. This is only due to the concept that micro-strategies are "leveraged bitcoins" in the market. Chanos believes this is wrong, and now is a good time to short MicroStrategy and be bullish on Bitcoin, because he believes that MicroStrategy's share price has a significant and unreasonable premium to its net Bitcoin holdings. He explained that the essence of its operation is "sell MicroStrategy stock, buy bitcoin", aiming to profit from the valuation difference between the two. Chanos, for example, is like "buying" bitcoin for $1, but being able to "sell" an overvalued MicroStrategy stock for the equivalent of $2.50, so he thinks it's a profitable business. Advantages and potential risks of arbitrage The Chanos strategy aims to profit from the decoupling between MicroStrategy's share price and the actual value of its Bitcoin holdings, and this strategy can hedge the risk of a direct rise in the price of Bitcoin to some extent. In other words, even if the price of Bitcoin rises, as long as the premium of MicroStrategy's share price relative to Bitcoin converges (i.e., the share price falls or does not rise as much as Bitcoin), it is still possible to profit from shorting MicroStrategy's position. But looking at the market performance data over the past year, the difference between the two is significant: MicroStrategy shares are up more than 220%, while Bitcoin is up nearly 70%. This means that if this trend continues, this strategy is not without risks, the main risks include the possibility that MicroStrategy's premium may persist or even expand, or that the price of Bitcoin fluctuates wildly, which can adversely affect both long and short positions. The data shows that as of April 2025, MicroStrategy's average acquisition cost of holding Bitcoin was about $68,500 per coin, while the company's enterprise value premium to its Bitcoin holdings is currently about 2 times and has even been as high as 3.4 times in history. Reflections on the valuation of conceptual proxy stocks This action by Jim Chanos reflects the cautious attitude of some institutional investors towards the overvaluation of cryptocurrency "proxy stocks". MicroStrategy's role as a "conceptual agent" for Bitcoin does provide a convenient avenue for investors who wish to participate in Bitcoin's price fluctuations through regulated stock markets, but it also comes with company-specific operational risks and increased market volatility. Although MicroStrategy reported a loss in the first quarter of 2025, it achieved a yield of 13.7% on its Bitcoin holdings, and the company raised its Bitcoin yield target for 2025 to 25% and set a "BTC yield" target of $15 billion. Some analysts predict that if MicroStrategy continues to accumulate bitcoin as planned (it is expected to hold 700,000 to 800,000 bitcoins by the end of 2025) and the bitcoin price can reach $150,000, its share price has the potential to soar to $1,200 to $1,600, driven by the premium effect. However, Chanos' strategy is undoubtedly a major questioning of the sustainability of this premium. In summary, Jim Chanos' bold actions against MicroStrategy and Bitcoin not only underscore his keen insight as a value investor, but also send a clear signal to the market that even in the high-profile crypto-asset-related space, there can still be a significant divergence between the intrinsic value of assets and the market price. How this challenge to the premium of "proxy stocks" initiated by investment giants will affect the valuation logic of Bitcoin and its related assets is worthy of continuous consideration and observation by all participants who pay attention to the efficiency of the cryptocurrency market and investment strategies. Related reports Arthur Hayes: Bitcoin does not necessarily fall to 70,000 has "bargain hunting", Trump tariff war will force the Fed to cut interest rates or print money Trump 2.0's first congressional speech: The American dream is unstoppable! 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