Short interest in small-cap U.S. stocks reaches a high, Mercurity Fintech short squeeze signals emerge

In the microstructure of the U.S. stock market, small-cap stocks have recently shown a series of characteristics that deserve high attention from investors.

According to data from Goldman Sachs' trading department, short interest in the Russell 2000 index reached $16 billion in July, one of the highest levels since 2021. While short positions in small-cap stocks have risen, a short squeeze is quietly unfolding, with the Russell 2000 index rebounding nearly 30% since its low in April.

According to classic market theory, short covering generates significant buying demand, and once this demand is concentrated and released, it will drive stock prices up sharply in the short term. Historical experience also confirms this; when short positions reach similar high levels, they are often accompanied by varying degrees of short squeeze. For example, during the economic recovery phase in 2020, some small-cap stocks doubled in the short term due to concentrated short covering.

The small float characteristic of U.S. small-cap stocks further amplifies the potential for price volatility. With slight inflows and outflows of capital, stock prices can exhibit significant movements. This high elasticity provides investors with trading scenarios to capture short-term excess returns, while also constructing a trading value logic of "high risk accompanied by potential high returns."

Taking the digital financial technology group Mercurity Fintech (MFH.US) as an example, as a small-cap stock with a total share capital of 63.6866 million shares, its recent price movements are particularly typical. On July 21, influenced by market sentiment, the company's stock price fell by 57.36%, with a transaction amount of $17.14 million; on July 24, the stock price quickly rebounded, surging by 53.12% with a transaction amount of $40.64 million, reaching an 8-month high.

The price movements of MFH are not isolated capital games. Combining short data and trading structure from the Fintel platform, there is still potential for further triggering a short squeeze. Data shows that MFH currently has a short position of 1.8157 million shares, accounting for 4.43% of the float; at the same time, the off-exchange short transaction volume is 209,100 shares, accounting for 53.64%. MFH's short interest ratio is 3.11 days, meaning that at the current trading volume, it would take about 3.11 days for short positions to be covered.

This data indicates that the short-term short-selling pressure on MFH is still manageable, but considering the company's small-cap characteristics, if market sentiment shifts and bullish forces gather, the release of short-covering demand within a time window of about three days could trigger stock price fluctuations. Looking back at MFH's recent market performance, the price rebound that occurred within three days after a sharp decline may be directly related to the pace of short covering, with buying pressure driving the stock price up, precisely aligning with the time characteristics of the covering days, highlighting the trading elasticity of the stock.

It is worth noting that the short-term speculation of stock prices will eventually return to the logic of fundamentals. MFH's layout and ecological positioning in the blockchain financial sector are the core factors supporting its long-term value.

From a business layout perspective, MFH's strategic path is clear and forward-looking. In June of this year, the company announced an $800 million fundraising plan to establish a long-term Bitcoin reserve, building an interest-bearing digital asset reserve framework through institutional-level custody and on-chain liquidity protocols, and integrating staking enhancement tools to strengthen its balance sheet. In July, the company reached a $200 million equity credit agreement with Solana Ventures, deeply binding itself to this public chain ecosystem, which has high throughput and low transaction fees as its core advantages. The plan is to generate income through staking, validating nodes, and Solana DeFi protocols, and to invest in tokenized assets and real asset platforms based on Solana, allowing it to precisely enter the core track of blockchain application implementation.

Subsequently, MFH raised $43.7 million (approximately RMB 310 million) through direct issuance registration, specifically aimed at advancing its cryptocurrency financial strategy, including ecosystem staking, tokenized income tools, and institutional-level on-chain financial infrastructure construction, further solidifying its business foundation. In addition, the company launched a $500 million DeFi basket treasury to optimize asset returns through diversified allocation, creating differentiated competitive barriers for MFH in the blockchain financial sector.

Currently, blockchain finance is in a dual-driven period of policy relaxation and technological iteration. The gradual opening of cryptocurrency ETFs by the U.S. SEC and the promotion of global central bank digital currency (CBDC) pilots provide a fertile ground for compliant development in the industry. MFH's layout coincides with this trend, positioning it to gain a first-mover advantage during the industry's explosive growth period.

Based on recognition of the company's long-term development prospects, MFH's board of directors also approved a share repurchase plan of up to $10 million within the next 12 months. This decision is seen by the market as a strong signal of the company's high confidence in its long-term value and development prospects, demonstrating the management's firm commitment to continuously enhancing shareholder returns during the construction of the blockchain fund management platform.

In the short term, MFH's small-cap characteristics and short-selling data support trading elasticity and short-squeeze potential, providing speculative opportunities for risk-tolerant investors; in the long term, its deep layout and ecological positioning in the blockchain financial sector enable it to share in the core logic of industry growth. As the business gradually takes shape and favorable external conditions are released, MFH's unique competitiveness in the digital finance field is expected to further stand out, becoming a high-quality target with long-term allocation value