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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, which let traders speculate on a stock’s price around the clock without owning the underlying shares, implied Elon Musk’s rocket and satellite company was at one point worth more than Nasdaq peers Amazon.com Inc. and Microsoft Corp.
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The contracts had retreated to converge with SpaceX’s pre-market trading price of around $203 as of 7:30 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.
After SpaceX’s rally on Monday, many traders wagered the stock had risen too far, too fast. When the contracts continued to climb instead, those bearish bets quickly turned sour. More than $50 million in short positions were liquidated within 24 hours, Coinglass data show.
Rising funding rates — periodic payments exchanged between buyers and sellers to keep the contracts aligned with the underlying stock — made it even more expensive to stay short. That prompted many investors to buy back contracts, fueling a classic short squeeze.
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 episode underscores both the appeal and the risk of crypto’s round-the-clock equity-tracking markets. They allow investors to react instantly when Wall Street closes, but they can also amplify moves that have little to do with the underlying stock.
Perps have the added hazard of funding rates, which can put additional pressure on traders to exit positions, exacerbating price moves.
“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.
(Updates pricing in third paragraph.)
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