James Chanos has closed his short position on Strategy, ending his well-known MSTR/Bitcoin pair trade

James Chanos, the famed short-seller best known for calling out Enron two decades ago, has closed one of his most talked-about crypto trades, unwinding his short position in Strategy (formerly MicroStrategy).

Chanos, who has been known for buying Bitcoin and shorting Strategy, confirmed the exit in a post on X, saying, “As we have gotten some inquiries, I can confirm that we have unwound our $MSTR/Bitcoin hedged trade as of yesterday’s open.” The decision marks the end of an 11-month bet that Strategy’s stock was overvalued relative to the Bitcoin it holds on its balance sheet.

The pair trade, recommended in December 2024 at Chanos & Co.’s annual Bears in Hibernation conference, involved shorting Strategy shares against a long position in Bitcoin. At the time, Strategy traded at 2.5 times its market-adjusted net asset value (mNAV). 

Arbitrage thesis fulfilled

The short bet proved exceptionally profitable. Strategy’s mNAV has now fallen to 1.23x, crossing Chanos’s pre-set cover threshold of 1.25x. “At today’s opening prices, MSTR (~$224) is down roughly 50% from its 2025 peak,” the firm said in an investor note shared alongside Chanos’s post. “The implied premium (MSTR EV less BTC holding value) is currently ~$15 billion, down from a peak of $80 billion in November 2024.”

Chanos has been vocal in his criticism of Strategy’s premium and frequent equity issuance, reportedly calling it financial gibberish.

“While we still believe there is more room for mNAV compression, the thesis has largely played out,” the firm wrote. “We recommend letting others chase the last leg of the trade as MSTR inevitably marches towards a 1.0x mNAV.”

Strategy’s market capitalization has fallen by over 14% from last year, when it was valued at over $80.8 billion. 

The current decline in Bitcoin prices, currently trading around $102,000, is also impacting Strategy’s treasury and stock performance, given that its portfolio is heavily Bitcoin-focused. However, as of the time of writing, MSTR is trading at around $241, up by over 4.7%.

A vote of confidence for Bitcoin?

However, despite the decline, Strategy has still been championing more Bitcoin acquisition, calling for more people to invest in the largest cryptocurrency by market cap. 

James Van Straten, senior analyst at CoinDesk, while reacting to Chanos’ announcement on X, described the move as “a signal that value starts to step in here, as Bitcoin is considerably undervalued against USD, Mag 7 and gold.” Some analysts on X went further to say that Strategy is undervalued 

Moments after Chanos’s post, Michael Saylor, Strategy’s founder and chairman, took to X to write simply: “₿uy Now.” His two-word message was reminiscent of the same bullish sentiment that has long defined his approach to Bitcoin accumulation.

Outlook for MSTR and Bitcoin

Chanos did not rule out further mNAV compression as Strategy continues to issue new shares to buy more Bitcoin. With the ratio now approaching parity at 1.23x, he said it was “prudent to cover” and allow others to pursue the remaining downside.

Bitcoin’s price reaction to the announcement was not impressive, as it’s still down by 1% from the previous day. Still, traders on X and crypto forums treated the closure as a psychological boost, framing it as a sign that institutional shorts like Chanos are losing conviction against Bitcoin-linked equities.

However, some believe it is a loss of faith in Bitcoin itself and an investor taking his profits before a major bear phase hits the market.

Saylor and Strategy continue to maintain a bullish posture, as the firm recently added more BTC to its treasury, bringing total holdings to 641,205 BTC.

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