Understanding MSTR’s $180M Failed Trades: A Possible Indicator of an Upcoming Short Squeeze

In the world of cryptocurrency and stock trading, understanding market dynamics is crucial for investors and traders alike. Recently, Strategy (MSTR), a notable bitcoin buyer, has drawn attention due to a staggering $180 million in failed trades recorded in March. This article delves into the implications of these Failed to Deliver (FTD) trades and explores the potential for a short squeeze as MSTR’s stock price continues to rise.

What Are Failed to Deliver (FTD) Trades?

Failures to Deliver occur when a seller fails to deliver shares to the buyer by the settlement deadline, which is now set at just one business day after the trade (T+1). According to data from the SEC and Fintel, more than 609,000 shares of MSTR failed to deliver in March, indicating a significant disruption in trading activity.

FTDs can result from various factors, including administrative errors, slow settlement systems, or difficulties faced by short sellers in repurchasing borrowed shares. When short sellers struggle to find stock to cover their positions, it often signals a potential market move, either up or down.

The Significance of MSTR’s Trading Data

In March, MSTR’s stock price experienced a 13% gain, which has led to increased scrutiny over the failed trades. Notably, on March 26, over 186,465 shares—valued at nearly $64 million—failed to settle. Other significant trading days include March 17 and March 21, where combined failed deliveries also totaled millions of dollars.

As MSTR’s price continued to climb, short interest in the stock remained notably high. By April, around 29 million shares were sold short, accounting for more than 12% of all publicly available shares. This elevated short interest raises the stakes for short sellers, especially as they face mounting pressure to cover their positions in a rising market.

Short Selling Dynamics and Potential Squeeze

Short selling involves borrowing shares to sell them, with the hope of buying them back at a lower price to return to the lender. If the market moves against the short sellers—such as in the case of MSTR’s rising stock price—they may be forced to buy back shares at a loss, leading to a short squeeze. This phenomenon can trigger a sharp increase in price, as seen recently in the bitcoin (BTC) market.

As of April 22, data revealed that about one-third of MSTR trades were executed as short sales off-exchange in private venues like dark pools. While these trades contribute to official short-interest reports, their lack of transparency makes it challenging for the public to track short-selling activity in real-time.

MSTR’s Stock Performance: A Closer Look

MSTR’s stock has shown remarkable resilience, gaining 35% since the beginning of March and 44% from its lows in April. The stock rallied 8% on a recent Tuesday, further indicating bullish sentiment among investors. This upward momentum in MSTR’s price, coupled with high short interest and significant FTDs, suggests that a short squeeze may be on the horizon.

The Implications of High FTDs

While failures to deliver do not inherently indicate price manipulation or guarantee a short squeeze, the size and frequency of FTDs for MSTR raise red flags for short sellers and investors alike. These indicators suggest a potential breakout or breakdown driven by short sellers’ actions. Investors should keep a close eye on MSTR’s trading activity in the coming weeks as the market responds to these dynamics.

Conclusion: What Lies Ahead for MSTR?

The recent trading activity surrounding MSTR highlights the complexities of stock and cryptocurrency markets, where short selling can significantly impact stock prices. As MSTR continues to gain traction, investors must remain vigilant, watching for potential shifts driven by short-selling dynamics and FTDs.

For those interested in further exploring cryptocurrency markets, resources such as How to Buy Bitcoin and Bitcoin ETF Insights can provide valuable information. Additionally, for a comprehensive understanding of various cryptocurrencies, consider checking out our articles on XRP and XRP price predictions.

As the landscape evolves, staying informed and adaptable will be key for investors navigating the ever-changing world of cryptocurrency and stock trading.

Disclaimer: This article, or parts of it, was generated with assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards. For more information, see CoinDesk’s full AI Policy.