Bitcoin buyer MicroStrategy's Nasdaq 100 entry to support stock rally
Updates prices
By Medha Singh
Dec 16 (Reuters) -MicroStrategy MSTR.O shares rose about 3% on Monday as the software company and bitcoin buyer was set to join the tech-heavy Nasdaq 100 index, further brightening the prospects of the stock.
The $25.7 trillion index that houses the largest non-financial companies will now gain indirect exposure to bitcoin via MicroStrategy, which holds $44 billion worth of the digital currency on its balance sheet, about 2% of the total supply of the world's largest cryptocurrency.
The prospect of more buying from funds that track the Nasdaq 100 could further boost MicroStrategy's stock that has surged nearly 550% this year alongside a jump in bitcoin price.
It could be "the start of a looping cycle of capital that could potentially drive up the spot BTC price," said Matthew Dibb, chief investment officer at cryptocurrency asset manager Astronaut Capital.
"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 QQQ.O 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 $106,000 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.
"MicroStrategy's bitcoin strategy is a long-term high-conviction 'buy & hold' strategy," said Bernstein analyst Gautam Chhugani.
The company's market capitalization rose to over $100 billion based on the latest share price, more than twice the value of its bitcoin stockpile.
Bitcoin miner Riot Platforms RIOT.O and some small biotech firms including Enlivex Therapeutics ENLV.O and Hoth Therapeutics HOTH.O have also decided to allocate portions of their cash to bitcoin.
"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," Dibb said.
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 PLTR.O and Axon Enterprise AXON.O, Nasdaq said late on Friday, replacing Illumina ILMN.O, Super Micro SMCI.O and Moderna MRNA.O. The reconstituted index will begin trading on Dec. 23.
Super Micro shares tumbled 9.5%.
Reporting by Medha Singh in Bengaluru, Editing by Louise Heavens and Shounak Dasgupta
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