SpaceX Crypto Short Squeeze Briefly Sends Value to $3 Trillion
(Bloomberg) -- A short squeeze in SpaceX perpetual futures briefly sent the company’s implied valuation to $3 trillion on blockchain-based markets shortly after Monday’s US stock-market close.
The volatile Asia trading on Tuesday for so-called perps — contracts that don’t expire — implied Elon Musk’s rocket and satellite company was at one point briefly worth more than Nasdaq peers Amazon.com Inc. and Microsoft Corp. The contracts had retreated to converge with SpaceX’s pre-market trading price of around $212 as of 6 a.m. in New York.
SpaceX shares rallied 43% in their first two days on the Nasdaq and were poised for further gains on Tuesday. The upward momentum from US trading on Monday extended to 24/7 crypto venues, as investors bet on where the stock price will head next. That wrong-footed perps traders who’d built short positions in SpaceX, leading to more than $50 million in bearish bets being liquidated within 24 hours and pushing the instruments higher.
Luca Parlamento, a portfolio manager at D2 Finance, said that bullish bets were in the majority during SpaceX’s stock-market trading hours, meaning the people holding long positions were paying those holding shorts. That reversed after hours, with shorts at one point paying an 81% annualized fee.
“So the post-market pressure was on the short side paying to stay short,” Parlamento said.
SpaceX perps prices started pulling away from the stock price almost as soon as US markets closed on Monday. Shares closed at $192.50, giving SpaceX a market capitalization of about $2.5 trillion. Within six hours, the perps prices on Hyperliquid had rallied to nearly $230.
Across multiple venues, including Hyperliquid and Binance, nearly $5 billion worth of the contracts changed hands in a 24-hour period.
The after-hours surge highlights how crypto-linked equity derivatives are creating a parallel — and at times messy — market for newly listed shares. The round-the-clock nature of crypto markets is appealing to people who want to take directional bets outside traditional trading hours, but prices can move sharply. Perps have the added hazard of funding rates, which are the payments that investors have to make to keep their positions open.
“The funding rate suggests that after yesterday’s 20% rally in the US session, traders positioned for a pullback in SpaceX by building heavy short exposure in the perpetual futures market,” said Pratik Kala, a portfolio manager at digital-asset hedge fund Apollo Crypto. “However, the continued price uptick forced short sellers to buy back contracts to limit losses, creating a short squeeze that added further upward pressure on the price.”
The SpaceX IPO has cemented Musk, its founder and chief executive officer, as the world’s first trillionaire and the company as one of the world’s most valuable.
The aerospace giant said on Monday that it has exercised the IPO’s over-allotment option, allowing underwriters to sell an additional 83.3 million shares. The so-called greenshoe option increases the gross amount raised to $86.2 billion.
Options on SpaceX shares are set to begin trading Tuesday on exchanges including Cboe Global Markets Inc. and Nasdaq Inc. Other options venues, including those owned by Intercontinental Exchange Inc.’s New York Stock Exchange and Miami International Holdings Inc., are expected to list contracts early next week.
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