MicroStrategy Could Soon Enter the S&P 500

The significant rise in MicroStrategy’s stock this year brings it close to qualifying for the S&P 500 index, which could prove positive for both the company and the bitcoin market.

The popular index, which tracks the U.S. stock market with a large capitalization of 500 companies, requires its components to have a market capitalization of at least $15.8 billion. MicroStrategy, whose shares trade on Nasdaq under the symbol MSTR, boasts a market capitalization of $12.4 billion, according to Yahoo Finance.

The software company’s shares have risen by 52 percent in the past month amid a surge in bitcoin prices. Bitcoin itself has increased by 22.5 percent during this time.

So far, MicroStrategy has marketed itself to investors as a de facto bitcoin ETF with benefits, including cash-generating operations and the ability to leverage the capital markets.

However, inclusion in the S&P 500 could bring a tsunami of new demand from passive investors who do not wish to be actively exposed to bitcoin, according to analysts.

– This could trigger a massive positive feedback loop that would allow bitcoin to start automatically infiltrating almost every portfolio – said Joe Burnett, senior product marketing manager at the bitcoin financial platform Unchained, in a tweet on Thursday.

According to Burnett, the rise in stock prices as a result of passive flows could ultimately benefit bitcoin, as MicroStrategy’s primary goal is to acquire as much of the largest cryptocurrency as possible. The company has previously used stock sales to finance bitcoin purchases, which could become more frequent if the market value of its shares continues to rise. MicroStrategy currently holds 190,000 bitcoins, which on Thursday surpassed a value of $10 billion.

CoinShares’ head of research James Butterfill agreed that MSTR could benefit from ETFs, thanks to flows following inclusion in the S&P 500. However, other asset managers could also take advantage of the same inclusion in the index.

– Historically, inclusion of equity into an index has often led to price declines after inclusion, and is therefore an investment strategy with varying levels of success – he warned.

Butterfill added that it is misleading to use MSTR and other stocks as a substitute for exposure to bitcoin. – They are exposed to a much broader range of variables, such as management expertise, lending environment, etc. – he said.

However, MicroStrategy’s inclusion in the index is not guaranteed. In addition to market capitalization size, companies qualifying for the S&P 500 must be headquartered in the U.S., have sufficient liquidity, and show net positive earnings in their previous four quarters, according to the index provider’s website.

Coinbase, a crypto exchange trading on Nasdaq, has a market capitalization of $39 billion but has struggled with profitability over the last four quarters, and therefore did not enter the S&P 500. ETFs launched last month by BlackRock and Fidelity are also not eligible for the S&P.