From listing on the Nasdaq to being included in the Index 100, crypto companies are continuously expanding their influence.
Written by: 1912212.eth, Foresight News
MicroStrategy has been officially selected into the Nasdaq 100 Index, and will take effect before the market opens on Monday, December 23. This also makes MicroStrategy the first crypto company in the crypto industry to be selected into the Nasdaq 100 Index.
Since then, MicroStrategy Chairman Michael Saylor has predicted that Bitcoin mining company MARA will be the next crypto company to be included in the Nasdaq 100 Index.
The reason behind the inclusion of crypto companies in the index with strict standards is that the traditional financial technology industry is becoming more and more open to them. From listing to being selected into the index 100, crypto companies may be setting off a trend of imitation.
The wave of crypto companies going public in the U.S.
The United States remains the world's leading technology powerhouse, and the U.S. stock market holds an important position in the global market. The expansion effect of the crypto industry typically gains widespread attention when companies list domestically. Listing on Nasdaq enhances the legitimacy, capital acquisition, and liquidity of crypto enterprises.
The listing process and requirements for companies in the U.S. typically follow high standards. For companies applying to go public, there are very specific requirements and regulations regarding recent company revenue, market capitalization, market makers, corporate governance, financial reporting, and compliance review.
Since 2020, various entities in the crypto market, including mining companies, exchanges, and crypto wallets, have gone public. In the exchange sector, Coinbase went public on Nasdaq in April 2021. Japanese brokerage and crypto exchange operator Monex Group also listed its subsidiary Coincheck Group N.V. on December 11.
Mining companies include CleanSpark, Mara Digital Holdings, and Riot Platforms. In the crypto wallet sector, Exodus Movement went public on the New York Stock Exchange on December 18.
It is worth mentioning that some companies initially did not operate in the crypto industry when they went public but later transitioned into it, such as Riot Blockchain and MicroStrategy.
In addition to the above-mentioned listed companies in the encrypted sector, companies currently preparing for listing also include Bitcoin financial services company Fold, DeFi Technologies, and online brokerage eToro.
U.S. exchange Kraken appointed a new CFO, Stephanie, in November this year, and its CEO stated that they are preparing for listing. Circle's CEO also expressed in an interview in October this year that they have long aspired to go public, and this vision has not changed.
In every cycle, many crypto companies officially go public, and by 2025, with ongoing compliance and influence, more crypto companies may appear on U.S. exchanges.
Nasdaq 100 Index
After a crypto company officially lists, the Nasdaq 100 index becomes a ladder for further gaining influence and recognition.
The Nasdaq 100 Index is a stock index launched by the Nasdaq Stock Exchange, consisting of the 100 largest non-financial companies listed on the Nasdaq. This index reflects the overall market performance of these companies and is one of the important indices watched by global investors.
Being included in the Nasdaq 100 index means that the market has met its stringent standards regarding market capitalization, stock liquidity, financial profitability, compliance, and more.
In recent years, MicroStrategy has won its ticket to inclusion through its Bitcoin hoarding strategy and impressive profitability.
Since 2020, MicroStrategy has been treating BTC as its main reserve asset. With MicroStrategy's aggressive purchasing, its stock price has surged in the new cycle driven by Bitcoin's strength. In January 2023, the MSTR stock price was only $150, while in March 2024, it surged to a peak of $1999.99, with a market capitalization in the hundreds of billions. In just over a year, its stock price return exceeded 1000%. On December 18, Michael Saylor announced that MicroStrategy's financial operations brought shareholders a net gain of 116,940 BTC this quarter, yielding a return of 46.4%, amounting to approximately $12.28 billion in net profit at a valuation of $100,000 per Bitcoin.
Not only does its stock price and profitability perform remarkably, but its market capitalization is also around several hundred billion dollars, making it one of the few publicly listed companies in the crypto sector with a market cap exceeding one hundred billion dollars.
In addition, being officially included in the Nasdaq 100 index also officially categorizes it as a technology stock based on its main business of 'software as a service' rather than as a financial stock.
MicroStrategy initially focused on providing business intelligence (BI), mobile software, and cloud-based services. Its main competitors include SAP AG's Business Objects, IBM Cognos, and Oracle Corporation's BI platform. According to its 2020 financial report, MicroStrategy's annual revenue was $480 million. Since it began heavily investing in Bitcoin in 2020, MicroStrategy has gradually been regarded as a Bitcoin concept stock, although its core business remains software and services.
For the crypto industry, the influence of the Nasdaq 100 may also encourage more companies to follow MicroStrategy's lead and join in Bitcoin investment.
MARA, the next crypto company to be included in the Nasdaq 100?
Bitcoin mining company MARA has become the next much-watched company that may be included in the Nasdaq 100.
Similar to MicroStrategy's approach, in the past few months, MARA has raised hundreds of millions of dollars through the issuance of convertible limited notes to continuously increase its Bitcoin holdings. However, it faces significant challenges to be included in the Nasdaq 100 index.
Although MARA is a non-financial company and meets certain requirements for profitability and liquidity, it is still far behind MicroStrategy in terms of market capitalization. Generally, companies included in the Nasdaq 100 have a high market cap, and a company must achieve a certain scale to be among the top 100.
As of now, MicroStrategy has a market capitalization of over $90 billion, while MARA's market cap fluctuates around $8 billion, placing them over ten times apart.
To join the Nasdaq 100 index, new companies must remove existing ones. While MicroStrategy is one of the three new companies, Illumina ($22.7 billion), Super Micro Computer ($19.8 billion), and Moderna ($15.7 billion) will be removed.
Currently, the three companies that are about to be removed all have market capitalizations exceeding $15 billion, which is still more than double that of MARA, casting a shadow on its inclusion.
MARA still has a considerable distance from the Nasdaq 100 index, but perhaps in the near future, it will be selected based on its data performance.
How far is it from the S&P 500 index?
The S&P 500 includes the 500 largest companies in the United States, covering approximately 80% of the total market capitalization of the U.S. stock market. The selection of constituent stocks is based on market capitalization, liquidity, profitability, and industry representation. The S&P 500 is considered a benchmark for the health of the U.S. economy and the performance of large-cap stocks.
In comparison, the selection criteria for the Nasdaq 100 and the S&P 500 are similar in that both require high market capitalization and stock liquidity. However, the Nasdaq 100 places greater emphasis on technology and innovation sectors, serving as an important indicator for growth-oriented investments.
The S&P 500 also emphasizes financial stability and profitability, which sets a relatively high standard for mining companies and crypto companies with a hoarding strategy.
As is well known, the four-year cycle in the crypto industry is still in effect, and when the market is in a bull cycle, companies often see significant profits, but once the cycle enters a bear market and coin prices decline, it can have a substantial negative impact on mining and companies that hold Bitcoin as an asset. Some companies may even suffer severe blows due to cash flow and other factors.
In summary, the selection criteria for the S&P 500 may be overall higher because it considers not only market performance but also strict requirements for financial health and industry diversity. The Nasdaq 100 focuses more on market performance and innovation, with a relatively more automated selection process, but inclusion may mean higher market recognition for companies in specific industries.
The company meets the minimum market capitalization and trading volume standards of the S&P 500 index, but currently does not satisfy other requirements: total positive earnings for the past four consecutive quarters.
Benchmark stock analyst Mark Palmer analyzed that 'MicroStrategy plans to adopt new Financial Accounting Standards Board (FASB) guidelines in the first quarter of 2025 to account for the Bitcoin held on its balance sheet, which will allow it to report positive earnings immediately.'
Since launching its Bitcoin acquisition strategy in August 2020, MicroStrategy has accumulated impairment losses of $3.1 billion. In December last year, the FASB issued new guidelines allowing companies that hold digital assets on their balance sheets to measure these assets at fair value and record changes in net income at fair value for each reporting period. The new rules will take effect on January 1, 2025.
Palmer continued to analyze that 'MSTR is expected to achieve a one-time growth of billions of dollars in quarterly net income in the first quarter of 2025, which will equal the difference between the recorded value of its Bitcoin on the balance sheet and its market value. If the net income growth proves sufficient to produce positive numbers for the past 12 months, along with MSTR's losses in the first three quarters, the company is likely to meet the S&P 500 inclusion standards before the second rebalancing of the index in June, scheduled for the third Friday of the month.'
If market conditions continue to perform well, MicroStrategy may have the opportunity to be included in the S&P 500 index again in June next year, achieving a dual success with both the Nasdaq 100 and the S&P 500.
