Key Takeaways
Bitcoin ( BTCUSD ) prices shattered another record, rising above $107,000 with growing optimism around reports that President-elect Donald Trump may be considering establishing a bitcoin strategic reserve.
The largest cryptocurrency by market cap broke the $107,000 price barrier Monday, after crossing $106,000 for first time in late trading Sunday. Meanwhile, MicroStrategy ( MSTR ), which calls itself a bitcoin treasury company, announced yet another $1.5 billion bitcoin purchase.
MicroStrategy shares were up more than 5% in recent trading Monday, and have gained over 527% year-to-date.
Bitcoin Prices, Nasdaq 100 Inclusion Prop MSTR Shares
MicroStrategy bought 15,350 bitcoins during the week ending December 15, for an average price of roughly $100,386 per bitcoin, the company reported. This purchase was financed by selling MicroStrategy shares.
The company now owns 439,000 bitcoins, worth approximately $47 billion at current prices. And its bet on bitcoin has had a big impact on its stock. MicroStrategy's market cap has grown from roughly $1.1 billion in August 2020 when it first adopted its bitcoin strategy to close to $100 billion now.
The exponential growth in MicroStrategy shares this year has been bolstered by rising bitcoin prices . Bitcoin rallied early this year due to demand from the newly launched spot bitcoin exchange-traded funds (ETFs), then the bitcoin halving and finally the reelection of Trump and hope of a more crypto-friendly administration.
But MicroStrategy shares may have more room to run. Its inclusion in the Nasdaq 100 index starting next week would imply many funds and ETFs—such as the Invesco QQQ Trust ( QQQ )—purchasing the stock to align their portfolios to the index.
However, the next milestone of becoming a part of the S&P 500 index may prove to be difficult, according to Bloomberg analysts James Seyffart and Eric Balchunas. While companies need to have a market capitalization of at least $18 billion, the S&P has complete discretion about deciding which companies make the cut.
The biggest issue for MicroStrategy could be its profitability. The company has not turned a profit in the past few quarters, the analysts said.
However, that could change for MicroStrategy come January 2025. Current accounting rules do not allow companies like MicroStrategy to record bitcoin on their books at fair value. Instead they are forced to take an impairment loss if bitcoin prices fall while not taking any gains from rising bitcoin prices into account. Those impairments would drag down the company's profits. New rules by
Financial Accounting Standards Board
(FASB) allow for capturing some of that upside from rising bitcoin prices.
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