Coinbase bear Jim Chanos closes fund as demand for fundamental stock pickers ‘wanes’

Short seller Jim Chanos is getting out of the game.
The trader, known for calling out fraud at Enron decades ago, is closing funds he manages.
Chanos had been short Coinbase since early 2022, criticising the exchange’s high retail fee structure.

Happy Monday!

Short seller Jim Chanos is packing it in. The legendary bear who shot to fame as an early sceptic of Enron in the early 2000s is closing his funds, according to reports.

More recently Chanos held a large short position against crypto exchange Coinbase.

Let’s dig in!

Coinbase bear

Chanos said he will shutter hedge funds he manages because “interest in fundamental stock pickers has waned.”

In April, Chanos told DL News he went short on Coinbase in the first quarter of 2022 when shares traded for around $250, betting its share price would fall.

Coinbase remains well below this price level, but is up around 200% this year, trading back above $100 again.

While it’s unclear whether Chanos has closed his Coinbase position, this year’s rapid price move has left bearish traders like him deep in the red.

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Since the first quarter of 2022 Coinbase shorts are down around $300 million, according to financial data firm S3 Partners.

This consists of mark-to-market profits of just over $2.2 billion in 2022, but losses of $2.5 billion so far in 2023.

Coinbase short interest, the number of shares of a stock that have been sold short by investors, is currently 24.6 million shares or 13.7% of the outstanding stock.

Chanos told DL News that his strategy on Coinbase was “simple” — the exchange charges its retail customers “unsustainably high fees/commissions, but is still losing money.”

Most exchanges — including Robinhood, Charles Schwab, and TD Ameritrade — charge investors nothing to buy and sell assets on their sites.

These firms typically only levy a spread, which is usually 1% of the price of the asset to book the trade.

Coinbase, the largest listed cryptocurrency exchange in the US, hasn’t joined the zero-commission club. The exchange charges customers anywhere from 0.6% to 3%, according to its quarterly filings, as well as a 1% spread.

Moreover, the company maintains an inscrutable fee model that’s tough for investors to understand, say analysts.

“I am as passionate as ever about research and investing, I feel compelled to pursue these passions in a different construct,” Chanos told investors in a letter seen by Bloomberg.

He expects to return all cash by the end of December.

Chanos and Co currently manage less than $200 million, down from over $6 billion in 2008, according to reports.

Crypto market movers

Bitcoin is up a little over 2% since Sunday, trading around $37,400.
Ethereum added 4% to trade above $2,000.

What we’re reading

How BlackRock’s ‘rich boomer money’ will change crypto — DL News
Why Marathon sees ‘huge’ potential for clean Bitcoin mining — DL News
5 Crypto Tools You NEED To Be Using — Milk Road
Mastercard Partners With AI Firm To Boost Crypto Fraud Detection — Milk Road
Short Seller Jim Chanos Shuts Hedge Funds After 38-Year Run — Bloomberg
Bullish Acquires CoinDesk from Digital Currency Group — Businesswire