The next time you’re at lunch with that one co-worker who won’t stop talking about Bitcoin ( … you know the one …), it might be wise to listen up. There’s a good chance that you – yes, you – also have a stake in the cryptocurrency now and want it to go up in price.
How? It mostly has to do with the recent inclusion of a company called MicroStrategy into the Nasdaq-100 starting on December 23, 2024. MicroStrategy (ticker: MSTR) has famously embraced Bitcoin, and it’s paid off handsomely for the company.
Though you may not realize it, some of your retirement accounts or brokerage holdings might contain funds that partially invest in MicroStrategy. Hence, the better Bitcoin does, the more Microstrategy goes up, and the richer you become. Here’s how that’s all tied together and why more of your portfolio could potentially be connected to cryptocurrency in the future.
The Connection Between MicroStrategy and Bitcoin
If you’ve never heard of MicroStrategy before, don’t be surprised. They’re a US-based company that started in 1989 and mainly provides business intelligence (BI), mobile software, and cloud-based services – stuff the average person doesn’t typically need or think about.
Around 2020, the company came into the public eye when co-founder and then CEO Michael Saylor decided to do something crazy with the company’s cash reserves: He used it to buy $250 million of Bitcoin. At the time, interest rates were extremely low and businesses had to think creatively if they wanted their treasury reserves to produce any sort of return.
This was one of the first times that a publicly traded company embraced Bitcoin in this way. Yet, it was also simultaneously seen as a huge step towards legitimizing its use and even turned Saylor into its unofficial poster boy.
Though people thought it was crazy, MicroStrategy stood by its conviction. Even when Bitcoin plummeted in price as crypto exchange FTX went bankrupt and its founder Sam Bankman-Fried was tried for fraud, MicroStrategy continued to buy more and more Bitcoin. Today, the company has a total holding of 446,400 coins. With Bitcoin’s current valuation of just under $100,000, that’s a staggering value of $41.51 billion!
Why You Might Inadvertently Own MicroStrategy
Just two years ago, one Bitcoin was $16,000. Now it’s essentially up by 600%, and that’s caused MicroStrategy to pop. Since buying Bitcoin almost five years ago, its stock is up by more than 2,800%!
When a company experiences that type of growth, people take notice – such as the Nasdaq stock exchange. In 2024, MicroStrategy was nominated for inclusion in their famous and widely tracked Nasdaq-100 index. This is a basket of securities issued by the 100 largest non-financial companies listed on the exchange. Think of big-name tech companies like Apple, Microsoft, Google parent Alphabet, Amazon, etc.
Becoming a part of a stock market index is a big deal for any company because it means the floodgates of money open. Many mutual funds and ETFs (exchange-traded funds) track these stock market indices by either mirroring their holdings one-to-one or using them as the basis of some customized portfolio.
One example is the ultra-popular Invesco QQQ Trust ETF. This fund started in 1999 and corresponds with the Nasdaq-100. With tech stocks having performed so well over the past decade, investors have been quick to pour money into the ETF – so much so that it currently manages an enormous $320 billion in assets. For reference, QQQ has beaten the broader and more commonly followed S&P 500 stock market index seven out of the last ten years.
With MicroStrategy now becoming a part of the Nasdaq-100, there’s a good chance that millions of investors will suddenly own a slice of it and not even realize it. It’s fairly common for people to make regular contributions to funds in their 401(k) or IRA without knowing the actual composition of individual stocks they hold. Hence, MicroStrategy could sneak its way in, and you’d become a Bitcoin investor by proxy.
A Trend That May Continue
MicroStrategy is not the only publicly traded company that holds Bitcoin, and it probably won’t be the last.
Back in 2021, Tesla (ticker: TSLA) made headlines when Elon Musk decided to invest $1.5 billion in Bitcoin. Similar to Saylor, Musk saw it as a way to diversify Tesla’s portfolio and support its interest (at the time) in accepting cryptocurrency as car payments. Since then, other companies such as Marathon Digital Holdings (ticker: MARA) and Galaxy Digital Holdings (ticker: GLXY) have also added substantial amounts of Bitcoin to their holdings.
Bitcoin may also not be the only digital asset these companies embrace. If cryptocurrency continues to rise, companies may also start to add other coins such as Ethereum and Tether to their reserves.
What This Means for You
Regardless of what you think about crypto, the writing on the wall is clear: It’s not going away any time soon. In fact, a major part of President-Elect Donald Trump’s campaign was to embrace it.
At a Nashville Bitcoin conference, Trump called for the US to be the crypto capital of the planet. Thus, you can expect that for the next four years, his administration is going to be very loose on regulating it – if not taking steps to make it even more mainstream.
Obviously, this is NOT a recommendation to jump into Bitcoin and invest your life savings. That’s a bad idea with any type of financial asset.
However, you should be aware of what’s happening and how it could play a role in your overall investment strategy. For instance, just gold or any other commodity, it could make sense for diversification purposes to include some tiny amount of crypto in your portfolio.
While most retirement and brokerage accounts won’t let you buy digital assets directly, Bitcoin proxies like MicroStrategy or other companies that hold it in their reserves could be one way to take advantage.
Alternatively, another option might be to invest in a “spot buy” Bitcoin ETF. For years, investment funds were limited to only having Bitcoin future contracts, not the actual digital asset itself, as part of its holdings. However, after extensive lobbying of the Securities and Exchange Commission (SEC), they finally gave the green light and made their US debut in January 2024. Now, everyday investors can buy ETFs such as the Grayscale Bitcoin Trust (ticker GBTC) or iShares Bitcoin Trust (IBIT) and benefit directly from cryptocurrency price swings without the headaches of managing the digital asset.
As with any investment, the best thing you can do for yourself is to become educated. Learn about both the advantages and disadvantages, and then decide on your own (or with guidance from someone you trust) if it should be part of your long-term plan. Simultaneously, maintain your budget and commit your excess savings towards your plan every time you get paid. A little bit each time will make all the difference in your financial future.
Featured image credit: Pexels
Buxfer Blog 