MicroStrategy's Stock Performance and Bitcoin Holdings

MicroStrategy, a software company and significant bitcoin stockpiler, saw its shares experience a brief surge before ending nearly unchanged on Monday. This occurred after the company was selected to join the tech-heavy Nasdaq 100 index, a move that further brightened the prospects of the stock.

The $25.7 trillion Nasdaq 100, which houses the largest non-financial companies, will now gain indirect exposure to bitcoin through MicroStrategy. The company holds $44 billion worth of the digital currency on its balance sheet, representing about 2% of the total supply of the world's largest cryptocurrency.

The prospect of increased buying from funds that track the Nasdaq 100 could further boost MicroStrategy's stock, which has surged nearly 550% this year alongside a jump in the bitcoin price. Its share price rose as much as 7% on Monday before running out of steam to close 0.042% lower.

According to Matthew Dibb, Chief Investment Officer at cryptocurrency asset manager Astronaut Capital, this could be "the start of a looping cycle of capital that could potentially drive up the spot BTC price." ETFs such as QQQ and many others would buy MicroStrategy to mirror holdings of the index, therefore driving up the price, and in turn, allowing MicroStrategy to purchase more BTC through debt, bond, and equity offerings.

The fifth largest U.S. exchange-traded fund Invesco QQQ Trust tracks the Nasdaq 100 and has $328 billion in assets under management, according to data analytics company VettaFi.

Bitcoin surged to a record high above $107,000 on Monday after President-elect Donald Trump suggested he plans to create a U.S. bitcoin strategic reserve similar to its strategic oil reserve. MicroStrategy's shares have gained 3,200% since adopting bitcoin as its treasury asset in 2020 under the leadership of co-founder Michael Saylor.

The company has more than doubled its bitcoin holdings this year through convertible note offerings and share sales. It reported a net loss of $340 million in the three months ended Sept. 20, its third consecutive quarterly loss.

Bernstein analyst Gautam Chhugani stated, "MicroStrategy's bitcoin strategy is a long-term, high-conviction 'buy and hold' strategy." The company's market capitalization rose to over $100 billion as its share price climbed, more than twice the value of its bitcoin stockpile. At the close, it was valued at almost $98 billion.

Bitcoin miner Riot Platforms and some small biotech firms including Enlivex Therapeutics and Hoth Therapeutics have also decided to allocate portions of their cash to bitcoin.

Matthew Dibb added, "Longer term, this is a huge milestone for crypto and we are bound to hear the voices, both bulls and bears, get a lot louder talking about MicroStrategy and Saylor in the months to come." Short sellers, or investors betting against MicroStrategy's shares, have lost a total of $9.7 billion since the beginning of the year.

Other entrants to the Nasdaq 100 include Palantir and Axon Enterprise, Nasdaq said late on Friday, replacing Illumina, Super Micro, and Moderna. The reconstituted index will begin trading on Dec. 23.