MicroStrategy's dramatic gains this year bring the company close to qualifying for the S&P 500 Index, which could prove positive for both the company and the Bitcoin (BTC) market.
The popular index, which tracks the large-cap U.S. stock market across 500 companies, requires its constituents to have a market capitalization of at least $15.8 billion. MicroStrategy, whose shares trade on the NASDAQ under the MSTR ticker, has a market capitalization of about $12.4 billion, according to Yahoo Finance.
The difference is just a stone's throw away for the Bitcoin development company, whose shares have risen 52% in the past month on the back of the Bitcoin price jump. BTC itself is up 22.5% during this time.
To date, MicroStrategy has marketed itself to investors as a de facto Bitcoin ETF with benefits including cash-generating operations and the ability to tap into capital markets.
However, according to analysts, inclusion in the S&P 500 could trigger a tsunami of new demand from passive SPY investors who aren't even actively seeking Bitcoin exposure.
“It could trigger a massive positive feedback loop that allows Bitcoin to automatically infiltrate almost any portfolio,” Joe Burnett, senior product marketing manager at Bitcoin financial platform Unchained, said in a tweet on Thursday.
Rising stock values through passive flows could ultimately benefit Bitcoin, according to Burnett, as MicroStrategy's primary goal is to acquire as much BTC as possible. The company has used stock sales to fund nine-figure BTC purchases in the past, which may become more common if the market value of its shares continues to rise.
MicroStrategy currently holds at least 190,000 BTC, the value of which (as of Thursday) exceeds $10 billion.
In a message to Decrypt, CoinShares head of research James Butterfill agreed that MSTR could “benefit from asset managers and ETFs” thanks to “mandatory” inflows upon its inclusion. However, other asset managers could also benefit from the same index inclusion.
“In the past, indexing a stock has often resulted in price declines after inclusion – so it is an investment strategy with varying degrees of success,” he warned.
Butterfill added that it is “misguided” to use MSTR and other stocks as proxies for Bitcoin exposure: “They are exposed to a much wider range of variables, such as: B. management competence, credit environment, etc.”
However, MicroStrategy's inclusion in the index is by no means guaranteed. Beyond market capitalization, eligible companies for the S&P 500 must be based in the United States, have sufficient liquidity and have positive net income over the last four quarters, according to the index provider's website.
Coinbase, the crypto exchange that trades on the NASDAQ as COIN, has a market capitalization of $39 billion – but has struggled with profitability over the last four quarters and therefore did not make the S&P 500.
Exchange-traded funds, including the numerous Bitcoin ETFs launched last month by BlackRock and Fidelity, are also ineligible for the S&P.
Edited by Andrew Hayward
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