I noticed that MicroStrategy (MSTR) is currently under heavy pressure from short sellers – the short interest has risen to 14%, which is quite high. But this isn’t about traditional bearish bets; it’s about something clever: arbitrageurs are using an ETF strategy to profit from the price difference between the MSTR stock and its Bitcoin holdings.

Here’s how it works: traders go long on a Bitcoin ETF like the iShares Bitcoin Trust (IBIT) and simultaneously short MSTR shares. The goal is to exploit the premium at which MSTR trades above the pure Bitcoin value of its holdings. A pretty sophisticated ETF strategy when executed correctly.

However: last year, it didn’t always work out. MSTR fell by 20%, while IBIT declined by 27% – a disaster for the traders. This shows that even well-thought-out strategies can fail in volatile markets. Still, the arbitrage idea remains interesting for many as long as the spread between the stock and ETF value is large enough.