Hedge Funds Are Shorting Crypto Stock Bakkt Right Now

Short interest data shouldn’t be ignored. Short sellers are high-conviction traders and research shows that heavily-shorted stocks tend to underperform.

In this report, we are going to look at the short interest data on Bakkt Holdings Inc (BKKT:US). Bakkt is a technology company that operates a platform for the management of digital assets. Its vision is to connect the digital economy. The company is listed on the New York Stock Exchange and currently has a market cap of around $390.38 million.

High Short Interest

Looking at the short interest data here, we see several issues that are concerning.

First, short interest is very high. Currently, 24.47 million Bakkt shares are on loan, which corresponds to 35.38% of the free float.

Second, the utilization rate is 100%. This tells us that every share available for lending is being lent out right now. In other words, demand for the stock from short sellers is intense.

VThird, the cost to borrow stock is elevated. Currently, it is 16.28%. Again, this signals high demand from short sellers.

Finally, short interest has been rising recently. Over the last three months, the number of shares on loan has increased by around 60%. This indicates that short sellers have been growing more bearish on the stock recently.

Bet Against Crypto 

As for why the short sellers are targeting Bakkt, it could be a bet against crypto. Bakkt certainly isn’t the only crypto stock that short sellers have in their sights right now. Other heavily-shorted crypto stocks include Coinbase (27% short interest), MicroStrategy (34%), Marathon Digital (54%), and Riot Platforms (40%).

It could also be related to the fact that the company is facing challenging market conditions and losing a ton of money. In its recent Q4 and 2022 results, Bakkt posted a net loss of $323.9 million.

As a result of the challenging market conditions, Bakkt is planning to reduce its headcount by around 40% by the end of 2023. It’s worth noting that since the company posted its 2022 results, analysts at Jefferies have reduced their price target for the stock from $2.25 to $1.25.

Whatever it is the short sellers are focused on here, we think caution is warranted towards the stock. The high level of short interest is a red flag, in our view.