Cryptocurrency stocks have taken quite a hit so far in 2022 as investors have rotated out of risk assets as interest rates rise.

Crypto stock short sellers have done fairly well so far this year, but a new report by S3 Partners analyst Ihor Dusaniwsky suggested short sellers expect more weakness ahead for crypto stocks.

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According to S3's adjusted short numbers, 33% of MicroStrategy's float is currently held in short positions, making it the most heavily shorted stock in the group. In addition, 24% of Marathon Digital's float is held in short positions, while short positions represent 19.2% of Riot's float.

S3 also said MicroStrategy is the most crowded short in the application software group with an S3 Crowded Score of 85. Marathon Digital is the third most crowded with a score of 72.5.

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Benzinga's Take: As of Thursday, none of the three crypto stocks were among the top five most squeezable application software stocks based on S3's Squeeze Score. But if Friday's big crypto rally continues into next week, it may begin to apply pressure to heavily shorted crypto stocks and put a major crypto stock short squeeze on the table in the near future.

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