MicroStrategy’s $44 billion Bitcoin bet drove the company to a near $100 billion valuation and an inclusion into the coveted Nasdaq-100 index.

Will inclusion in the S&P 500 be next? Probably not, market watchers say.

While the software company’s detractors have criticised MicroStrategy for its reliance on Bitcoin, its massive treasure trove is not the reason why S&P 500 inclusion remains out of reach.

“The barrier is the index’s profitability screen,” said Bloomberg Intelligence analyst James Seyffart in a note, shared by fellow analyst Eric Balchunas on X. “MicroStrategy falls short because it’s been profitable in just one of its past four quarters.”

Balchunas described the S&P 500 as “the holy grail” for companies like MicroStrategy.

He referred to the S&P’s inclusion criteria that dictates that any index candidate must post positive earnings in the most recent quarter and cumulatively across the past four quarters.

Inclusion into the S&P 500 would mean placement in major indexes like SPY and VOO, offering traditional investors a direct Bitcoin proxy through some of the world’s most widely tracked funds.

The path to S&P500

Under current accounting rules, MicroStrategy’s Bitcoin holdings are reported at their lowest price since purchase, even if the price recovers.

However, a new Financial Accounting Standards Board rule change in January could work in MicroStrategy’s favour.

“The new rule will allow MicroStrategy to classify Bitcoin as a financial asset and value it at fair value, benefiting the company’s earnings given a Bitcoin price near $100,000,” wrote Seyffart.

With 423,650 Bitcoin now worth over $44 billion, this could align MicroStrategy’s reported earnings with its actual market performance.

Still, inclusion isn’t guaranteed. Profitability remains just one factor, and the S&P committee has full discretion over which companies join the benchmark.

Nasdaq win

MicroStrategy’s inclusion in the Nasdaq-100, effective December 23, means that its stock will join index-tracking funds like QQQ, with over $250 billion in assets.

However, this victory may prove short-lived.

The Nasdaq-100 excludes financial firms, and MicroStrategy’s massive Bitcoin holdings could lead to a reclassification during the next benchmark review in March.

For now, the company remains classified as a technology firm, thanks to its software analytics revenue.

If its Bitcoin-centric strategy pushes Nasdaq to reclassify it as a financial company, MicroStrategy could be removed from the index.

Crypto market movers

  • Bitcoin is up 2.3% over the past 24 hours to trade at $104,615.

  • Ethereum is up 2.1% to $3,945.

What we’re reading

  • ‘One Bitcoin = one Satoshi’ proposal looks to ditch the crypto’s decimal points — DL News

  • Ethereum is dead…again. — Milk Road

  • How Warren’s Power on Senate Banking Is Backfiring in Caroline Crenshaw Confirmation — Unchained

  • What you missed this week — Milk Road

  • How bullish is Anthony Scaramucci? He’s buying a new Lambo as even Democrats embrace crypto — DL News

Kyle Baird is DL News’ Weekend Editor. Got a tip? Email at kbaird@dlnews.com.