Source: Cointelegraph Original: "{title}"

The New York Stock Exchange (NYSE) has implemented a short sale restriction (SSR) on GameStop due to a surge in its short sale trading volume, reminiscent of the famous short squeeze event involving GameStop in 2021.

According to TradingView data, the short sale volume of GameStop (GME)—the total number of shares sold short within a specific time frame—rose by 234% in 24 hours, reaching 30.85 million shares, marking a new high since March 27.

The SSR rule comes into effect when a stock drops more than 10% from the previous day's closing price. According to Google Finance, GameStop's stock fell by 22% during the trading day, erasing a 12% gain from a Bitcoin announcement.

At the time of this article's publication, GME was trading at $22.09.

GameStop's short sale volume approaches 2021 short squeeze levels

This rule will continue to apply after the trading day ends and into the next trading day. Kevin Malone, President and CEO of Malone Wealth, stated in a post on X on March 27, "Today's trading volume for GameStop is 50 times that of last Thursday. Without naked short selling, this is statistically impossible."

GameStop's short sale volume reached 30.88 million shares on March 27. Source: TradingView

This figure is close to the levels seen in January 2021, when GameStop's stock skyrocketed due to a "short squeeze," resulting in significant losses for hedge funds and other short sellers, while some retail traders reaped substantial returns.

The peak for that month occurred on January 19, reaching 33.26 million shares.

GameStop's Bitcoin purchase seen as "like the internet bubble era"

GameStop did not specify how much Bitcoin it plans to purchase, but after the market closed on March 26, the company announced a $1.3 billion convertible bond issuance plan.

However, some analysts and commentators have expressed skepticism about GameStop's plans to start buying Bitcoin. Tom Sosnoff, founder and CEO of Tastylive, said in an interview with Yahoo Finance on March 27 that GameStop's decision to buy Bitcoin feels "a bit like the internet bubble era."

Source: Hans Akamatsu

"It feels a bit like, 'Oh, I'm going to add .com to my name, I'm going to use our excess cash to buy some Bitcoin because we can't find a company that adds value,'" Sosnoff said.

Meanwhile, Bret Kenwell, a U.S. investment analyst at eToro, told Reuters on March 27, "Investors may not necessarily be optimistic about its underlying business."

The largest single-day short sale remains attributed to Keith Gill's return

The largest single-day short sale volume remains on June 3, 2024, when the short sale volume reached 46.2 million shares.

This was around the time when Keith Gill, known for his role in the 2021 GameStop short squeeze event, revealed on June 2 that he had resumed trading GameStop stock, investing $180 million.

GameStop stated that the convertible preferred bonds—debt that can later be converted into equity—will be used for general corporate purposes, including acquiring Bitcoin.

Some analysts believe that the announcement of the convertible bond issuance is the reason for the stock price decline.

Han Akamatsu noted in a post on X on March 27 that GameStop's stock price drop is similar to the reason for Strategy (formerly MicroStrategy) experiencing a stock price decline after issuing convertible bonds.

"Akamatsu said, 'In 2021, MSTR issued $1.05 billion in 0% convertible bonds, and the stock price fell after the announcement due to hedging short sales, but when Bitcoin rose, the stock price exploded, releasing arbitrage opportunities.'"

He added, "Now GME is following the same blueprint… If GME or Bitcoin rises significantly, this deal will become very interesting because we have a squeeze opportunity."

Related: Does GameStop's purchase of Bitcoin help Bitcoin price reach $200,000?

This article does not contain investment opinions or advice. Every investment and trading activity involves risk, and readers should conduct their own research before making decisions.

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