The Bitcoin Journey of Tech Companies: Microsoft Declines, Tesla Holds, MicroStrategy Achieves Milestone
The attitudes of technology companies towards Bitcoin are polarized.
Author: Tuo Luo Finance
Last week's market was full of ups and downs.
On the policy front, everything is flourishing, with increased expectations for interest rate cuts and Trump continuing to show goodwill. However, on the news front, some are happy while others are worried. First, Google's quantum computer sparked panic, and then Microsoft voted to reject a Bitcoin investment proposal, briefly cooling the market's FOMO, causing mainstream currencies to dip and altcoins to suffer significant losses. On the other hand, MicroStrategy successfully joined the Nasdaq 100 index last weekend, reigniting enthusiasm in the market.
Currently, with the impending interest rate cut in December, market sentiment remains high, and price support is gradually rising. However, when it comes to tech companies, the divergence in Bitcoin's trajectory continues.
On December 14, Nasdaq officially announced that MicroStrategy (MSTR) has been officially included in the Nasdaq 100 index, becoming the 40th largest company in the index with a market capitalization of over $98 billion. Other companies added include data analytics firm Palantir Technologies and gun manufacturer Axon Enterprise, while gene sequencing equipment maker Illumina, AI server manufacturer Super Micro Computer, and vaccine manufacturer Moderna were removed. The new index will take effect before the market opens on December 23.
In fact, a few days before the official announcement, Crypto Briefing reported on this news, which subsequently led to a vote on Polymarket regarding whether the index would be officially included. Because of this, when the news was first confirmed, the market did not see a significant rise; instead, mainstream currencies experienced slight fluctuations due to profit-taking.
However, as of today, in conjunction with the strong likelihood of an interest rate cut, the market has started to rise as expected. Bitcoin briefly broke through $10,600, reaching a new high, while Ethereum also surpassed $4,000. The crypto sector saw a broad increase, with the RWA sector leading with a 7.23% rise, and the long-dormant NFT sector also climbing by 7.06%.
Why does the Nasdaq 100 index hold such great appeal? According to its introduction, the Nasdaq 100 index was established in 1985 and has a long history. It consists of the 100 largest stocks by market capitalization and influence listed on the Nasdaq exchange, primarily concentrated in technology, consumer, healthcare, industrial, and communication sectors, with a focus on tech stocks. Unlike the S&P 500 and the Nasdaq Composite Index, the Nasdaq 100 index only selects non-financial companies, with no financial institutions among its constituents.
Currently, the index covers many well-known tech companies, such as Apple, Microsoft, Google, Amazon, Tesla, Meta, Nvidia, and Intel. In terms of performance, the Nasdaq 100 index has doubled the growth of the S&P 500 index over the past decade, exhibiting significant high returns and high volatility characteristics. This year, influenced by the rise of the tech sector, the Nasdaq 100 index has risen over 30%.
Over time, many large investors have shown a preference for this index. Notably, the Invesco QQQ Trust Fund tracks the Nasdaq 100 index, with the fund's size reaching $320 billion. According to Bloomberg analyst James Seyffart's report, approximately $451 billion in ETFs directly track the Nasdaq 100 index. When the index is refreshed, global ETFs will purchase at least $22 billion, buying 19 different stocks. By this standard, about $2.1 billion in new funds will flow into MicroStrategy.
It can be seen that while the Nasdaq 100 index may not be as well-known as the S&P 500 and other composite indices, it still holds a high level of recognition and credibility in the traditional financial world. As the first crypto component stock to be included in the index, MicroStrategy undoubtedly reflects the growing influence of the crypto sector, broadening investor channels and marking a watershed moment for crypto companies entering the traditional financial world. The inclusion of the index has profound significance for both individual stocks and the crypto sector.
As for why it was included in the index, the reason is quite straightforward: market capitalization trumps all. The inclusion mechanism for the Nasdaq 100 index is relatively lenient, requiring companies to rank in the top 100 by market capitalization and have an average daily trading volume of at least 200,000 shares, but there are no explicit requirements regarding profitability.
From MicroStrategy's perspective, since it began purchasing Bitcoin in 2020, driven by its founder Michael Saylor, a staunch supporter of crypto, it has become a star representative of crypto companies on Wall Street. In terms of business model, MicroStrategy, which initially started with BI software, now focuses entirely on Bitcoin. The company's valuation model relies on market capitalization premium rates, financing through equity dilution to increase BTC holdings, and enhancing per-share BTC holdings, thereby boosting the company's market value. In simple terms, it designs the distribution ratio between equity and Bitcoin, using bonds and stock sales to purchase Bitcoin, and then realizes capital turnover through Bitcoin appreciation.
This year, MicroStrategy has issued over $6 billion in convertible notes to raise funds for Bitcoin purchases. As of December 8, 2024, MicroStrategy has acquired 423,650 BTC at an approximate cost of $25.6 billion, with an average price of about $60,324 per Bitcoin, making it the publicly traded company with the largest Bitcoin holdings in the world.
In the context of rising Bitcoin values, MicroStrategy's stock has also soared, with its price increasing over 500% this year, peaking at $543. The trading volume has been astonishing, with daily trading volumes even surpassing those of Nvidia and Tesla, two tech giants currently in the spotlight. Currently, MicroStrategy's market capitalization is close to $98 billion, placing it among the top 100 publicly traded companies in the U.S.
The soaring returns have stirred significant waves in the market, with well-known short-selling firm Citron targeting the company, arguing that its stock price is already too high. However, MicroStrategy continues to ignite a following strategy in the market. This year, Bitcoin mining companies such as Marathon Digital, Riot Platforms, Core Scientific, Terawulf, and Bitdeer have also emulated MicroStrategy by financing Bitcoin purchases through similar convertible bonds.
In this context, it is not surprising that the influential, highly profitable, and high-valued MicroStrategy has been included in the Nasdaq 100 index. With increased exposure to traditional investors, its stock price still has the potential for further increases, which also means it has more capital to purchase Bitcoin. On December 13, the founder even hinted at buying more Bitcoin.
It is worth noting that being included in the index has also brought more controversy to the company. For example, Nasdaq explicitly requires non-financial companies, and while MicroStrategy carries the title of a tech company, it is essentially a Bitcoin investment firm that hoards and trades Bitcoin, or more akin to a Bitcoin ETF. The founder even claimed that MicroStrategy would become a "Bitcoin bank."
In response, Michael Lebowitz, a portfolio manager at RIA Advisors, bluntly stated, "This is essentially a company that would die without Bitcoin." The financial reports indeed reflect this, as per its Q3 report, the cumulative revenue for the first three quarters of fiscal year 2024 was $343 million, down 7.81% from $372 million in the same period last year, with a cumulative net loss of $496 million. From the software business perspective, Q3 software business total revenue was only $116.1 million, a 10.3% year-over-year decline.
On a positive note, the FASB's fair value accounting rules officially took effect today. Under the new accounting rules, companies can account for Bitcoin at its total appreciated value rather than its purchase price, giving crypto companies like MicroStrategy more operational flexibility. It is foreseeable that in the financial reporting season in February next year, most crypto companies will have more impressive performance.
Despite the doubts, the market's expectations are even further. Due to the nature of the company, MicroStrategy's journey in the Nasdaq 100 index may not be long-term. Bloomberg analyst James Seyffart indicated that ICB might choose to reclassify MicroStrategy as a financial stock during the next change period in March. However, after achieving its small goal on Nasdaq, the broader S&P 500 has become the next milestone the market hopes MicroStrategy will reach. The S&P 500 is more lenient regarding company attributes but sets a higher threshold for profitability, requiring the total profit over the last four consecutive quarters to be greater than zero. Although there is a divergence with MicroStrategy, the market still holds some hope based on the new government and new accounting standards.
On one side, the high premium issue is being resolved, while on the other, Microsoft has doused the market with cold water.
Before the news of MicroStrategy's index inclusion, on December 11, Microsoft made a final vote on the proposal to "include Bitcoin on the company's balance sheet." Similar to previous predictions, despite Michael Saylor's impassioned three-minute speech attempting to persuade Microsoft shareholders to support the decision, experts still believed that investing in cryptocurrencies could not guarantee improved portfolio returns. Ultimately, as the board had previously indicated, Microsoft's Deputy General Counsel Keith Dolliver stated during the live stream of the shareholder meeting that the proposal was formally rejected.
Based on this case, Amazon's similar proposal in April is also likely to be rejected. As a result, Bitcoin briefly fell below $95,000 at that time. In fact, the common refrain is that for well-known tech giants holding large amounts of cash, volatility is a critical factor to consider. Most tech giants adopt conservative and stable financial strategies when investing, rather than pursuing the volatile risk-return profile. Compared to such returns, strategic acquisitions and continuous R&D investments clearly align better with the long-term values of tech giants. Additionally, tech giants place more emphasis on social impact, while the high energy consumption associated with Bitcoin and other crypto assets contradicts the green ideals they promote, potentially leading to regulatory risks, which is also one reason why these giants are reluctant to venture into this area.
It cannot be denied that holding Bitcoin has become a trend among tech companies. According to data from DL News, approximately 144 companies currently hold Bitcoin on their balance sheets. However, the attitudes of tech companies toward Bitcoin show a clear divergence, primarily divided into three paths: one is the aggressive representative MicroStrategy, which builds its business directly around Bitcoin, with many imitators being crypto companies; another is the conservative giants like Microsoft and Amazon, which pursue stability and safety, maintaining a wait-and-see attitude and are unlikely to easily engage; and the last group is in the middle ground, choosing to hold Bitcoin while focusing on their core business, but their attitudes vary, either viewing Bitcoin as part of asset allocation, such as Tesla and SpaceX led by Musk, which currently holds 9,720 BTC, or using it to influence speculation due to business growth limitations.
However, at present, the divergent attitudes of tech companies do not dampen the market's exuberant sentiment. Although the giants remain cautious, other companies pursuing returns are clearly not slowing down, as Bitcoin strategies are simple to implement and can yield rare growth returns. Broadly speaking, during Trump's pro-crypto government term, Bitcoin is likely to have speculation potential on par with AI in the U.S. stock market, representing a new direction for value appreciation. Whether for brand marketing, asset allocation, or stabilizing stock prices, many companies, especially publicly traded ones facing business bottlenecks, will not easily abandon it. Therefore, as the mainstreaming of crypto evolves, corporate layouts will only increase, representing a broad and substantial cash flow even if they are not giants.
On the other hand, the Trump effect continues. On December 15, Trump stated in an interview that he would establish a Bitcoin strategic reserve similar to the oil reserve and would "do great things in the field of cryptocurrency." As expected, with strong policy support, the bullish sentiment in the crypto market remains quite strong. The market has already cast its vote, with the concentrated price range for Bitcoin holders rising from $95,000 towards $100,500.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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