MicroStrategy (MSTR) is poised to be added to one of the largest exchange-traded funds globally, marking a significant milestone as the first bitcoin-focused company to gain entry into the Nasdaq-100 Index.
The Nasdaq-100 Index comprises the 100 largest non-financial firms listed on the Nasdaq exchange, featuring prominent companies such as Apple, Nvidia, Microsoft, Amazon, Meta, Tesla, and Costco.
Following the Nasdaq's announcement at 8 pm ET on Friday, the price of bitcoin (BTC) saw a slight increase, surpassing $102,000.
On November 29, the date when Nasdaq conducted a market assessment for the index's annual rebalancing, MicroStrategy's market capitalization was approximately $92 billion. This positions the company, led by Michael Saylor, as the 40th largest entity in the Nasdaq 100, with an anticipated index weighting of 0.47%, according to Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence.
For context, prior to this year's rebalancing, Apple held the largest weighting in the index at just under 9%, while Qualcomm ranked 20th with a weighting slightly above 1%.
MicroStrategy's inclusion will significantly enhance the Nasdaq 100's exposure to bitcoin (BTC), as the company possesses around $42 billion in bitcoin assets, thereby opening MSTR to substantial passive investment opportunities. Balchunas noted that ETFs tracking the Nasdaq 100 manage over $550 billion in assets, with Invesco's QQQ Trust (QQQ) being the largest, boasting more than $300 billion in assets under management.
James Van Straten, a senior analyst at CoinDesk, remarked, “The addition of MicroStrategy to the Nasdaq 100 could be one of the most significant developments of 2024, second only to the launch of US spot-listed ETFs. These funds typically purchase at various price levels on a monthly basis, which will create additional demand for MSTR, especially as Michael Saylor continues to utilize the at-the-market (ATM) offering, potentially diluting shareholders but expanding the buyer base.”
James Seyffart, a colleague of Balchunas, warns that MicroStrategy's presence in the index may be temporary. This is due to the possibility of the company being reclassified as a financial entity in March, as its valuation is primarily derived from its bitcoin assets rather than its core business operations. Michael Saylor, the founder and Executive of MicroStrategy, has previously indicated his intention to transform the company into a "bitcoin bank," further distancing it from its technology roots.
Van Straten noted, "The game theory now suggests that the SPDR S&P 500 Trust (SPY), the largest ETF with approximately $650 billion in assets under management, may need to incorporate MSTR to compete effectively with rivals. This will provide millions of investors with indirect exposure to bitcoin, enhancing the flywheel effect."
The reorganization of the Nasdaq 100, along with the QQQ and associated ETFs, is set to take effect on December 23.
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