The cryptocurrency market is witnessing a notable shift in sentiment as prominent Wall Street short sellers, including the legendary James Chanos, are reportedly closing their bearish bets against MicroStrategy (MSTR). This strategic retreat by major players is signaling a potential turning point for MSTR stock and could ripple positively through Bitcoin (BTC) treasury inflows.
Short Sellers Retreat from MicroStrategy
For months, major investment firms like Chanos & Co. and Kerrisdale Capital had capitalized on MSTR's perceived overvaluation, identified through its market-to-net-asset-value (mNAV). The mNAV metric compares a company's market value to its underlying crypto holdings, with higher readings indicating a premium for leveraged Bitcoin exposure. With MSTR's mNAV having dramatically compressed from highs around 3.4x to nearly 1x, these short sellers believe their bearish thesis has largely played out. Chanos specifically noted covering his position as mNAV dropped below 1.25x, acknowledging the significant profit already realized from the stock's more than 50% decline since July's peak.
A Bullish Signal for Bitcoin Treasury Inflows?
The covering of short positions is typically interpreted as a bullish indicator, suggesting that sellers' exhaustion could pave the way for new buyers to step in. Analysts are now anticipating near-term relief for MSTR, and more importantly, a potential resurgence in treasury inflows into Bitcoin. Historically, Digital Asset Treasuries experienced substantial surges during past Bitcoin rallies, with weekly inflows tripling to $6 billion in late 2024. However, these inflows plummeted by 98% after mid-2025 amidst the "bear market" and compressed mNAVs. While MicroStrategy itself continues to increase its capital offerings for fresh BTC purchases, the crucial question remains: will the broader market embrace this signal, allowing bulls to elevate MSTR's mNAV and revive the much-needed treasury inflows for BTC? The market stands at a critical juncture, watching for a definitive reversal.
