Bloomberg reports: MicroStrategy is about to enter the "Nasdaq 100 Index" and become the 40th larges

summary： Bloomberg reports: MicroStrategy is about to enter the "Nasdaq 100 Index" and be...

Bloomberg reports: MicroStrategy is about to enter the "Nasdaq 100 Index" and become the 40th largest constituent stock. The stock market is shocked!

The NASDAQ 100 Index in the United States will undergo its annual rebalancing in December, drawing significant attention from the market. This index primarily tracks the 100 largest non-financial companies by market capitalization listed on the NASDAQ Stock Exchange, including major tech giants like Apple, Microsoft, and Amazon. Additionally, the index serves as the benchmark for the ETF "Invesco QQQ Trust," which has a far-reaching impact on global investors. According to a Bloomberg Intelligence report, MicroStrategy, the company known for holding Bitcoin, may be included in the index and become its 40th largest constituent. This would represent a major milestone for the company in the financial markets.

NASDAQ 100 Index and ETFs
The NASDAQ 100 Index is designed to reflect the overall performance of U.S. technology stocks. Its constituents mainly come from sectors such as information technology, consumer services, and healthcare, and their market capitalizations must meet certain thresholds. According to the rules, each constituent's market cap must maintain a weight of at least 0.1% to remain in the index. Companies with a market cap too low may be removed. Changes to the index often have a significant impact on related ETFs, such as the "Invesco QQQ Trust," a fund that tracks the index’s performance. The annual rebalancing is a key event in the market, as it can trigger substantial inflows or outflows of capital, potentially affecting the overall market's liquidity.

MicroStrategy's Rise
Founded in 1989, MicroStrategy originally provided enterprise-level business intelligence (BI) solutions. While the company did not experience significant growth in the past, a major strategic shift occurred in 2020 when MicroStrategy decided to incorporate Bitcoin as a key part of its capital allocation strategy, becoming one of the largest publicly traded holders of Bitcoin. Since then, the company has attracted considerable attention, not only in the enterprise technology space but also within the cryptocurrency sector.

MicroStrategy’s CEO, Michael Saylor, was the main driver behind the decision to include Bitcoin in the company’s capital strategy. He has argued that Bitcoin is a store of value that can effectively hedge against the risk of dollar depreciation. This strategy garnered widespread attention, especially as Bitcoin's value increased, making MicroStrategy’s Bitcoin holdings increasingly attractive. Since 2020, the company has made several major Bitcoin purchases, each worth billions of dollars. This not only increased the proportion of Bitcoin on its balance sheet but also caused its stock price to surge.

Expected to Become the 40th Largest NASDAQ 100 Constituent

According to Bloomberg Intelligence’s analysis, if MicroStrategy is added to the NASDAQ 100 Index, it is expected to become the 40th largest constituent with a market cap weight of approximately 0.47%. This change would bring increased attention to MicroStrategy's stock, particularly from funds and ETFs that track the index’s performance. The news of the company’s inclusion is likely to drive a large influx of capital, potentially further boosting its market value.

Currently, MicroStrategy’s market cap is about $82 billion, a significant increase from the $54.8 billion it had earlier. This year alone, MicroStrategy’s stock price has surged by more than 450%, far surpassing Bitcoin’s 110% increase. This performance shows that investors have a highly optimistic view of the company’s Bitcoin strategy, seeing it as an indirect way to invest in cryptocurrency.

ETF Inflows and Market Impact
Analysis suggests that MicroStrategy’s inclusion in the NASDAQ 100 Index would lead to a large inflow of ETF capital, potentially reaching $2.1 billion, about 20% of the company’s average daily trading volume. This reflects the market’s strong interest in tech stocks, especially those related to Bitcoin, amid the ongoing growth of the cryptocurrency market.

However, some analysts point out that while MicroStrategy’s inclusion in the NASDAQ 100 has positive market implications, the company still faces challenges in terms of profitability. Therefore, it is unlikely to be included in the S&P 500 Index in the short term. The S&P 500 has stricter profitability requirements, and the accounting rules related to Bitcoin are still being adjusted, which could affect the company’s future earnings performance.

Cryptocurrency and Stock Market Interactions
MicroStrategy’s success is closely tied to the performance of Bitcoin. Since the company began purchasing significant amounts of Bitcoin, the cryptocurrency’s price fluctuations have had a noticeable impact on its stock price. As Bitcoin’s price has risen, the value of MicroStrategy’s assets has also increased. This trend reflects the growing interaction between traditional financial markets and the cryptocurrency sector. As more institutional investors enter the Bitcoin and cryptocurrency markets, the price fluctuations of these assets are expected to influence the traditional stock market, potentially leading to more interactions between cryptocurrencies and traditional assets in the future.

With the increasing valuation of Bitcoin, MicroStrategy has not only achieved exceptional performance in the stock market but has also positioned itself as one of the representative companies in the cryptocurrency sector. This strategy has made MicroStrategy a popular choice for traditional investors looking to gain exposure to Bitcoin, while also providing more capital inflows into the cryptocurrency market.

Tags: MicroStrategy, NASDAQ 100, Bitcoin, ETF, Market Cap