Author: Carbon Chain Value
On December 13, Nasdaq officially announced the results of the annual rebalancing of the Nasdaq 100 Index. Among them, MicroStrategy (MSTR), which claims to be a Bitcoin company and 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 exponentially increase the Nasdaq 100 Index's exposure to Bitcoin, exposing MSTR to billions of dollars in passive investment. Currently, the Nasdaq 100 Index tracks the largest non-financial companies listed on the Nasdaq exchange, including market-dominant firms such as Apple, Nvidia, Microsoft, Amazon, Meta, Tesla, and Costco.
CoinDesk senior analyst James Van Straten stated: MicroStrategy's inclusion in the Nasdaq 100 Index can be seen as the second biggest news of 2024, second only to the U.S. listing of a Bitcoin spot ETF. These funds typically buy at any price level every month, which will add another buyer for MSTR, as Michael Saylor continues to issue at market price (ATM), diluting shareholders but expanding the buyer base.
Bloomberg senior ETF analyst Eric Balchunas stated on social media that MicroStrategy's inclusion in the Nasdaq 100 Index symbolizes a change of era.
Some are curious: what is MSTR's weight in the index currently? Eric Balchunas stated that we estimate it will have a weight of 0.47%, making it the 48th largest holding. This weight corresponds to approximately $2.1 billion in purchases through all ETFs tracking this index, which have a total value of $451 billion. We have not included SMA or CIT or any active strategies, so the final amount may be a bit higher.
However, Bloomberg's other ETF analyst James Seyffart warned that the possibility of MicroStrategy being included in the index may be short-lived, as the company's value is almost entirely derived from its Bitcoin holdings rather than its actual operating business, and thus the company may be reclassified as a financial company in March. MicroStrategy founder and executive Michael Saylor even stated that he plans to transform the company into a 'Bitcoin bank,' making it less like a technology company.
There are market views that currently SPDR S&P 500 Trust (SPY) is the largest ETF by size, with assets under management of about $650 billion, and it may need to include MSTR to compete with its peers, in which case millions of investors will now indirectly invest in Bitcoin, thus increasing the flywheel effect.
The rebalancing results for the Nasdaq 100 Index as well as QQQ and related ETFs will take effect before the market opens on December 23.
A review of MicroStrategy's Bitcoin strategy.
Since mid-2020, MicroStrategy co-founder and chairman Michael Saylor decided to invest in Bitcoin to hedge against inflation. The company initially used cash for acquisitions, and has now shifted to using proceeds from issuing and selling stock and convertible bonds to enhance its purchasing power.
According to previous reports by Zhitong Finance, this strategy and the surge in Bitcoin's value helped MicroStrategy outperform all major U.S. stocks, including AI leader Nvidia. Since August 2020, MicroStrategy's stock price has risen by over 2,500%. During the same period, Bitcoin has increased by about 660%.
As of November 8, 2024, this company headquartered in Tysons Corner, Virginia, holds a total of 423,650 Bitcoins, with a total purchase price of $25.6 billion, an average cost of $60,324 per coin. Currently, MicroStrategy is the largest publicly traded company holder of Bitcoin, aside from BlackRock.
According to reports from Wall Street Journal, MicroStrategy has adopted 'BTC yield' as a metric to measure its Bitcoin acquisition strategy. MicroStrategy explains 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 all of the company's convertible debt has been converted into shares, then every 1,000 shares of outstanding stock will own 1.29 Bitcoins. This ratio has increased by 41.8% compared to December 31 of last year, when there were only 0.91 Bitcoins for every 1,000 shares. MicroStrategy refers to this 41.8% growth as the 'year-to-date BTC yield.'
This yield can be calculated over different time periods, such as quarterly or year-over-year, and can also compare any two dates with available data.
Recently, BTC yield has been showing a rapid upward trend. Just four weeks ago, MicroStrategy announced in a press release that 'the year-to-date BTC yield has reached 26.4%', a significant increase from 17.8% on September 30.
When MicroStrategy first adopted BTC yield as a key performance indicator, the company ambitiously stated that starting next year, they would strive to elevate this metric to a range of 4% to 8%.
What is the Nasdaq 100 Index?
According to official information, the Nasdaq 100 Index consists of the 100 largest non-financial companies listed on the Nasdaq stock market, with a history dating back to January 1985—nearly 40 years ago—when it was launched alongside the Nasdaq Financial 100™ Index, which consists of the 100 largest financial stocks listed on the Nasdaq. These indices serve as benchmarks for financial products such as options, futures, and funds. The Nasdaq 100 is rebalanced annually in December, with Friday coinciding with the expiration date of quarterly stock index futures, stock index options, stock options, and individual stock futures (referred to as quadruple witching expiration date).
The Nasdaq 100 Index is the basis for the Invesco QQQ Trust (Nasdaq: QQQ), designed to provide investment results that correspond to the performance of the Nasdaq 100 Index (before fees). Additionally, options, futures, and structured products based on the Nasdaq 100 Index and Invesco QQQ Trust are also traded on multiple exchanges.
