Famous shorting investor Jim Chanos: go long Bitcoin + short MicroStrategy for Arbitrage

Jim Chanos, a well-known short investor, recently said in an exclusive interview with CNBC that it is extremely absurd for companies such as Strategy to use fundraising to buy bitcoin and then use "we own bitcoin" as a reason to increase the company's valuation, and suggested that investors go long to bitcoin while shorting micro-strategies to arbitrage.

Famous shorting investor Jim Chanos

Jim Chanos is a well-known shorting investor on Wall Street and the founder of Chanos & Company.

Chanos gained notoriety in the early 2000s for successfully predicting the collapse of the Anron (Enron). He focuses on identifying anomalous behavior in corporate earnings, especially highly speculative phenomena that the market has not noticed. In the past, he also shorted fraud and other behaviors, but now he is more of an "irrational enthusiasm" to observe the market.

He currently runs a family office and continues to advise institutional investors.

Chanos goes long on Bitcoin, shorting MicroStrategy

Jim Chanos mentioned: "In a bull market, investors give a premium for promises; in a bear market, reality gets discounted." He believes that certain areas of the current market are returning to a state of "paying a premium for promises," indicating a resurgence of speculative sentiment.

His currently recommended trading strategy is to go long on Bitcoin while simultaneously shorting MicroStrategy Strategy (, originally named MicroStrategy). This is an arbitrage strategy that exploits the premium between its stock price and the net value of Bitcoin.

He criticized companies like Strategy for using fundraising to buy bitcoin and then using "we own bitcoin" as a reason to increase the company's valuation. He dismissed this as absurd, noting that the companies were actually "selling promises and dreams" to retail investors.

He stated that the premium between the market price of Strategy and the net asset value (NAV) is an important indicator for observing market speculation sentiment. This premium had narrowed during recent market turbulence but has recently rebounded, indicating that speculation sentiment remains strong.

And he used the "short spread" operation, that is, buying bitcoin while shorting Strategy stock, to bet on the narrowing of the premium. This strategy does not predict the trend of Bitcoin, but focuses on the spread between the two to arbitrage, which is also the usual operation method of hedge funds.

Source: Strategy Tracker

According to data from the Strategy Tracker, the NAV Premium once soared to 3.4 last November, but has since retreated this year, with the current value at 1.86.

( MicroStrategy MSTR becomes a new indicator for Bitcoin, mNAV premium ratio and tracking website introduction )

Chanos warns that there are still many areas in the market filled with irrationality and excessive optimism, and investors should be vigilant about the phenomenon of "valuing based on dreams." He still believes that shorting remains an effective risk hedging tool, especially in such an environment.

This article by well-known shorting investor Jim Chanos: go long on Bitcoin + short MicroStrategy for arbitrage first appeared in Chain News ABMedia.