Thanks for your reply, Torque.
It seems that each time Michael Saylor announces his latest purchase of bitcoin, the price dumps. This is conterintuitive, but one explanation is that after the announcements, the bears feel safe to short since there's going to be no huge MSTR buying pressure for a few days.
I think the real answer to this question is buried at the end of this article:
https://www.cnbc.com/2025/01/21/david-einhorn-says-we-have-reached-the-fartcoin-stage-of-the-market-cycle.htmlShorting leveraged bitcoin ETFs
Greenlight took advantage of the craziness around crypto during the fourth quarter by betting against some popular ETFs linked indirectly to bitcoin.
The two funds the firm focused on were the T-Rex 2X Long MSTR Daily Target ETF (MSTU) and the Defiance Daily Target 2X Long MSTR ETF (MSTX). Those funds use derivatives to try to achieve two-times the daily returns of MicroStrategy,
a software company that has turned itself into a bitcoin treasury vehicle in recent years.
The funds have at times struggled to achieve that goal due to MicroStrategys volatility and little supply of the derivatives most easily used to get the leveraged returns.
The letter said Greenlight took short positions against those funds during the quarter, partially offset by owning MicroStrategy stock in an arbitrage trade that was a material winner.
TL/DR - So shorting MSTR Long 2X ETFs while owing MSTR stock, an arbitrage play.
Do these 2x ETFs track bitcoin or something else? Do Greenlight add on top of their short after MSTR buys, or is that an automatic effect of the makeup of the ETFs? I honestly don't understand the mechanism hinted at by the article.
Thanks OGNasty, too, for trying to clear my doubts, but I do not see it, either.
It seems that each time Michael Saylor announces his latest purchase of bitcoin, the price dumps. This is conterintuitive, but one explanation is that after the announcements, the bears feel safe to short since there's going to be no huge MSTR buying pressure for a few days.
I keep seeing people confused by the price action when Saylor buys and I can't understand what is confusing about it. "The price dips after Saylor buys." Well, duh... If you buy billions of dollars worth of Bitcoin, it pushes the price up unnaturally,
Is supply/demand an unnatural law?
then as normalcy sets in the price comes back down.
I would object that the bitcoins removed from supply stay removed as long as MSTR doesn't sell them back immediately, which would restore "normalcy". Where is my fallacy, if any?
Still, every time Saylor buys I see people on X saying he should do surprise buys or other comments like that... Unfortunately, even if you pop out of the bushes and surprise the market with a buy out of nowhere, the price still gets pushed up and then settles back down again. Is this not common sense?
I don't see the common sense in the "then settles back down again" bit. You are assuming a "locally unlimited" supply, is my impression.
Of course I might be wrong - I often am - so a more detailed explanation could help me see what you mean (and maybe Torque too, from a different angle).
