Author: Carbon Chain Value
On December 13, Nasdaq officially announced the results of the annual reorganization of the Nasdaq 100 Index. Among them, MicroStrategy (MSTR), which claims to be a Bitcoin company and has experienced explosive growth this year, will be added to the index and become one of the 75 largest non-financial companies on Nasdaq. It is reported that this addition will double the exposure of the Nasdaq 100 Index to Bitcoin and expose MSTR to billions of dollars in passive investments. Currently, the Nasdaq 100 Index tracks the largest non-financial companies listed on the Nasdaq exchange, including Apple, Nvidia, Microsoft, Amazon, Meta, Tesla, and Costco, which dominate the market.
James Van Straten, senior analyst at CoinDesk, said: MicroStrategy's inclusion in the Nasdaq 100 Index can be seen as the second biggest news in 2024, second only to the US-listed Bitcoin spot ETF. These funds usually buy monthly at any price level, which will add another buyer to MSTR when Michael Saylor continues to issue at market price (ATM) to dilute shareholders, but the buyer base will be larger.
Eric Balchunas, senior ETF analyst at Bloomberg, said on social media that MicroStrategy's joining the Nasdaq 100 Index is symbolic of the changing times.
One wonders: what is the current weight of MSTR in the index? Eric Balchunas says, "We estimate it will receive a 0.47% weight and be the 48th largest holding. This weight equates to a purchase of approximately $2.1 billion through all ETFs that track the index, which have a combined value of $451 billion. We do not include SMA or CIT or any active strategies, so it may end up being a bit more."
However, James Seyffart, another ETF analyst at Bloomberg, warned that MicroStrategy's inclusion in the index may be short-lived, because the company's value comes almost entirely from its Bitcoin holdings, not actual operating businesses, so the company may be reclassified as a financial company in March. MicroStrategy founder and executive Michael Saylor even said he plans to transform the company into a "Bitcoin bank" to make it less like a technology company.
There is a market view that the SPDR S&P 500 Trust (SPY), currently the largest of all ETFs with approximately $650 billion in assets under management, may need to include MSTR to compete with its competitors. In that case, millions of investors will now indirectly invest in Bitcoin, thereby increasing the flywheel effect.
The reorganization results for the Nasdaq-100 Index, as well as QQQ and related ETFs, will take effect before the opening of trading on December 23.
Review of MicroStrategy’s Bitcoin Strategy
MicroStrategy co-founder and chairman Michael Saylor decided to invest in Bitcoin as a hedge against inflation since mid-2020. The company initially used cash for acquisitions, but has now turned to using proceeds from issuing and selling stocks and convertible bonds to increase its purchasing power.
According to previous reports by Zhitong Finance, this strategy, as well as the surge in the value of Bitcoin, has helped MicroStrategy outperform all major U.S. stocks, including artificial intelligence leader Nvidia. MicroStrategy's stock price has risen by more than 2,500% since August 2020. During the same period, Bitcoin has risen by about 660%.
As of November 8, 2024, the Tysons Corner, Virginia-based company held a total of 423,650 bitcoins at a total purchase price of $25.6 billion and an average cost of $60,324 per bitcoin. MicroStrategy is currently the largest publicly traded company holding bitcoins besides Bele.
According to Wall Street Journal, MicroStrategy has used "BTC yield" as an indicator to measure its Bitcoin acquisition strategy. MicroStrategy explained that the concept of BTC yield refers to the percentage change in the number of Bitcoins owned by the company per share between two dates.
Specifically, as of November 17, assuming that all of the company's convertible debt had been converted into stock, each 1,000 shares outstanding would have 1.29 bitcoins. This is a 41.8% increase from December 31 last year, when each 1,000 shares had only 0.91 bitcoins. MicroStrategy calls this 41.8% increase "year-to-date BTC return."
This rate of return can be calculated based on different time periods, such as quarterly, year-on-year, or by selecting any two dates with data for comparison.
Recently, BTC yields have been showing a rapid upward trend. Just four weeks ago, MicroStrategy announced in a press release that "BTC yields have reached 26.4% year-to-date," a significant increase from 17.8% on September 30.
When MicroStrategy first included BTC yield as a key performance indicator, the company ambitiously stated that they would strive to increase this metric to a range of 4% to 8% starting next year.
What is the Nasdaq 100 Index?
According to the official introduction, the Nasdaq 100 Index is composed of the 100 largest non-financial companies listed on the Nasdaq Stock Market. Its history can be traced back to January 1985 - nearly 40 years ago - when it was launched together with the Nasdaq Financial 100™ Index, which is composed of the 100 largest financial stocks listed on the Nasdaq. These indices are benchmarks for financial products such as options, futures and funds. The Nasdaq 100 is rebalanced every December, and Friday coincides with the expiration date of stock index futures, stock index options, stock options, and individual stock futures for the quarter. (Referred to as the quadruple witching expiration date)
The Nasdaq-100 Index is the basis for the Invesco QQQ Trust (NASDAQ: QQQ), which seeks to provide investment results that correspond, before fees, to the performance of the Nasdaq-100 Index. In addition, options, futures and structured products based on the Nasdaq-100 Index and the Invesco QQQ Trust are traded on multiple exchanges.
