Short positions, a striking strategy against crypto skeptics, have historically inflicted significant long-term losses on their perpetrators. The 2015 movie, The Big Short, depicted the opportunities unveiled during the 2007-2010 financial crisis, reflecting genuine historical events. Conversely, cryptocurrencies, despite being dismissed as bubbles by critics, have largely epitomized innovation. Kerrisdale Capital isn’t targeting cryptocurrencies per se but is instead betting on the downfall of another storyline.
Short Selling Strategy
Renowned for its short-selling tactics, Kerrisdale Capital recently announced its short position in Bitmine (BMNR) shares. This move marks the preliminary phase in foreseeing the collapse of crypto reserve companies. Notably, no company in many global exchanges, including those in the U.S, Japan, and Germany, has yet established a crypto reserve company. However, some have discovered methods to leverage cryptocurrencies as reserves to artificially bolster share prices.
The Turkish firm, Martı, followed this trend on the U.S. stock exchange, too. If any bubble exists, it’s forming around publicly traded companies creating crypto reserves. These companies, engaging in cash flow narratives and presuming constant crypto ascension, are trying to emulate Microstrategy.
MSTR stocks also faced short selling, yet Michael Saylor managed to stay afloat due to his early entry and low average cost. Those shorting MSTR witnessed the shock of its shares surpassing their all-time high from two decades ago.
Impermanence of Crypto Reserve Strategy
Kerrisdale Capital argues that the crypto reserve strategy has homogenized, and the intensifying market competition is causing premiums to fall swiftly. While Kerrisdale is not shorting ETH, it criticizes BMNR’s model as lacking scarcity and sustainability, deeming the reasoning behind premium trading as obsolete.
Bitcoin (BTC) 
$77,129 greatly benefitted from this model, while Ethereum (ETH) 
$2,521 and Solana 
$102 (SOL) managed to some extent. Binance Coin (BNB) felt its support during its ATH journey. Kerrisdale Capital points out that companies rapidly forming crypto reserves are losing first-mover advantages.
Kerrisdale insists that the Days of the DOT (Decentralized Optical Technology) playbook are redundant, and with identical copies flooding the market, the opportunity to issue shares significantly above NAV to enhance ETH per share is vanishing. The competition is intensifying, with over $100 billion planned for capital raising, which eliminates the scarcity keeping premiums high.
Even pioneers like MSTR struggled to maintain momentum, witnessing their premium fall from 2-2.5x NAV to approximately 1.4x. Kerrisdale warns that as market cycles falter and models collapse, many firms will trade at or below parity.
In August, when growth stalled, BMNR stopped reporting crucial investor data, namely NAV and share count per share, following 25 August. This glaring omission signals a downturn rather than potential rebounds in per-share increase.
Finally, setbacks seen in a $365 million “profitable” direct offering headline reveal a veiled discounted cash gathering when valuing attached warrants. Kerrisdale’s takeaway is clear: without strategies or scarcity to justify premiums, BMNR’s main aim remains overcharging investors for copying ineffective game plans.
