The road to Bitcoin for technology companies: Microsoft declined, Tesla held the currency, and MicroStrategy achieved a milestone

Author: Gyro Finance

The market last week was full of ups and downs.

Everything is booming on the policy front, expectations of interest rate cuts are increasing, and Trump's goodwill continues. But the news is that some people are happy and some are worried. First, Google's quantum computer caused panic, and then Microsoft voted to reject the Bitcoin investment proposal, which briefly cooled down the market's FOMO. Mainstream currencies took a stab at it, and altcoins suffered a heavy fall; but on the other hand, MicroStrategy successfully included it last weekend. The Nasdaq 100 Index has once again added fuel to the fire to the market.

From the current point of view, against the background of the upcoming interest rate cut in December, market sentiment is still high and the price support band is gradually rising. But only from the perspective of technology companies, the path differentiation for Bitcoin continues.

On December 14, according to official Nasdaq reports, MicroStrategy (MSTR) has been officially included in the Nasdaq 100 Index, becoming the 40th largest company in the Nasdaq 100 Index with a market value of more than US$98 billion. Companies added at the same time include data analysis company Palantir Technologies and Taser manufacturer Axon Enterprise, while gene sequencing equipment manufacturer Illumina, AI server manufacturer Super Micro Computer and vaccine manufacturer Moderna have been removed. The new index will be launched in December Effective before the market opens on the 23rd.

In fact, Crypto Briefing reported the news a few days before the official announcement, which subsequently triggered a vote on Polymarket on whether the index could be officially included. It is precisely because of this that when this news was confirmed, the market did not rise significantly. Instead, the mainstream currencies fluctuated slightly due to the selling news.

But as time comes today, in line with the fundamentals of a high probability of interest rate cuts, the market began to rise as expected. Bitcoin briefly exceeded 10,600, setting a new high, while Ethereum also broke through 4,000 US dollars, and the encryption sector rose across the board. RWA The sector led the rise by 7.23%, and the long-dormant NFT sector also rose by 7.06%.

Why does the Nasdaq 100 Index have such great charm? Judging from the introduction, the Nasdaq 100 Index was established in 1985 and already has a long history. It is the market value selected by the Nasdaq Exchange based on the listed companies in the exchange. With the 100 most influential stocks, stocks are concentrated in technology, consumer, medical, industrial and communications industries, with technology stocks as the mainstay. Unlike the S&P 500 and the Nasdaq Composite Index, the Nasdaq 100 Index only selects non-financial companies and does not include financial institutions among its constituent stocks.

At present, the index has covered many well-known and well-known technology companies, such as Apple, Microsoft, Google, Amazon, Tesla, Meta, Nvidia, and Intel. In terms of performance, compared with the S&P 500 Index, the Nasdaq 100 Index has doubled its growth rate in the past 10 years and has significant characteristics of high returns and high volatility. This year, affected by the rise of the technology sector, the Nasdaq 100 Index The NASDAQ 100 rose more than 30%.

Since its development, many large investors have favored the index. It is worth noting that the Invesco QQQ Trust Fund is the tracking basis of the Nasdaq 100 Index. The scale of the fund has reached 320 billion US dollars. According to a report by Bloomberg analyst James Seyffart, there are approximately US$451 billion in ETFs around the world that directly track the Nasdaq 100 Index. When the index is refreshed, global ETFs will buy at least US$22 billion in 19 different stocks. , according to this standard, about $2.1 billion in new funds will flow into MicroStrategy.

It can be seen that although the Nasdaq 100 Index is not as well-known as the S &P 500 and other comprehensive indexes, it still has high visibility and recognition in the traditional financial world. MicroStrategy, as the first crypto component stock to be included in the index, undoubtedly reflects The continued growing influence in the crypto field not only broadens investor channels, but also marks a watershed moment for crypto companies to enter the traditional financial world. Whether it is for individual stocks or the crypto sector, the inclusion of stock indexes has far-reaching significance.

As for why it is included in the index, the reason is quite straightforward. Market value trumps everything else. The inclusion mechanism of the Nasdaq 100 Index is relatively loose, including ranking in the top 100 by market capitalization and the average daily trading volume of the stock must be at least 200,000 shares, etc., but there are no clear regulations on profitability.

As for MicroStrategy itself, since it started buying Bitcoin in 2020, driven by Michael Saylor, the founder of radical encryption supporter, it has become a star representative of encryption companies on Wall Street. In terms of business model, MicroStrategy, which originally started out as BI software, now focuses its business entirely around Bitcoin. The company 's valuation model relies on the market value premium rate, and it uses equity dilution financing to increase its BTC holdings and increase its BTC holdings per share. This will increase the company's market value. To put it simply, by designing the allocation ratio between equity and Bitcoin, buying Bitcoin through bonds and selling stocks, and then realizing capital operation through the appreciation of Bitcoin.

Since this year, MicroStrategy has issued more than US$6 billion in convertible notes to raise money to buy coins. As of December 8, 2024, MicroStrategy has acquired 423,650 BTC for approximately US$25.6 billion, at a price of approximately US$60,324 per Bitcoin. , becoming the listed company holding the largest number of Bitcoins in the world.

Against the background of the rising value of Bitcoin, MicroStrategy has also soared. This year alone, the stock price has risen by more than 500%, soaring as high as $543. The trading volume is even more astonishing. The single-day trading volume once even surpassed Nvidia and Tesla. Two booming technology companies, MicroStrategy's current market value is close to US$98 billion, ranking among the top 100 US listed companies by market value.

The soaring earnings caused an uproar in the market. Citron, a well-known short-selling institution, targeted the institution and believed that its stock price premium was too high. However, MicroStrategy still ignited a strategy following craze in the market. This year, Bitcoin mining companies Marathon Digital, Riot Platforms, Core Scientific, Terawulf and Bitdeer have all followed MicroStrategy's lead in purchasing Bitcoin through similar convertible bond financing.

In this context, it is understandable that MicroStrategy, which has great influence, strong money-making effect, high valuation and high market capitalization, is included in the 100 Index. As its exposure to traditional investors increases, its stock price is still likely to rise further, which also means that it has more capital to buy Bitcoin. On December 13, the founder also posted a picture suggesting that he would buy Bitcoin. More Bitcoin.

It is worth noting that inclusion in the index has also caused more controversy for this company. For example, Nasdaq clearly requires non-financial companies, and although MicroStrategy bears the name of a technology company, it is completely a Bitcoin investment company that hoards and speculates in coins, or is more similar to a Bitcoin ETF. The founder even threatened to Says MicroStrategy will become a “Bitcoin bank.”

In this regard, Michael Lebowitz, the portfolio manager of RIA Advisors, said bluntly, "This is essentially a company that will die without Bitcoin." The financial report indeed shows that, according to its Q3 financial report, the cumulative revenue in the first three financial quarters of fiscal year 2024 The cumulative revenue in the same period last year was US$372 million, a year-on-year decrease of 7.81%, and the cumulative net loss in the first three quarters of fiscal year 2024 was US$496 million. From the perspective of software business, Q3 software business revenue was only US$116.1 million, a year-on-year decrease of 10.3%.

But the positive thing is that the FASB fair value accounting rules officially come into effect today. Under the new accounting rules, companies can record Bitcoin based on the total value-added price, rather than the purchase price, giving crypto companies such as MicroStrategy more room to operate. It is foreseeable that during the financial reporting season in February next year, most crypto companies will have even more impressive performance.

Although doubts exist, the market's expectations are also further ahead. Due to the nature of the company, MicroStrategy's journey to the 100 Index may not be long-term. Bloomberg analyst James Seyffart said ICB may choose to reclassify MicroStrategy as a financial stock during the next change in March. But after the completion of Nasdaq's small goal, the more broad-spectrum S&P 500 became the next milestone that the market hopes MicroStrategy will reach. The S&P 500 is more tolerant in terms of company attributes, but has set a higher threshold for profitability, requiring the sum of profits for the last four consecutive quarters to be greater than zero. Although it deviates from MicroStrategy, under the new government and new accounting standards , the market still holds some hope.

This side solved the problem of high premiums, but Microsoft on the other side poured a splash of cold water on the market.

Before MicroStrategy announced its inclusion in the index, on December 11, Microsoft made a final vote on the proposal to "include Bitcoin into the company's balance sheet." Similar to previous predictions, although Michael Saylor used an exciting three-minute speech to try to persuade Microsoft shareholders to support this decision, experts still believe that there is no guarantee that investing in cryptocurrencies will improve the returns of the investment portfolio. Ultimately, as the board of directors has previously stated, Keith Dolliver, Microsoft's deputy general counsel, said in a webcast of the shareholder meeting that the proposal was officially rejected.

Based on this case, Amazon’s similar proposal in April will most likely be rejected. Affected by this, Bitcoin once fell below $95,000 at the time. In fact, it's a cliché that for established tech giants with huge amounts of cash on their hands, volatility is a key consideration. Most technology giants adopt conservative and prudent financial strategies when investing, rather than pursuing volatile risk returns. Compared with such gains, strategic acquisitions and continued investment in R&D are obviously more in line with the long-term values ​​of technology giants. In addition, technology giants pay more attention to social effects, but the high energy losses caused by crypto-assets such as Bitcoin are contrary to the green concepts advocated by the giants, and may even bring certain regulatory risks. This is why giant companies are unwilling to try one.

It is undeniable that it has become a trend for technology companies to hold Bitcoin. According to data from DL news, around 144 companies hold Bitcoin on their balance sheets to date. However, looking at the attitude of technology companies towards Bitcoin, there is a clear differentiation, which is mainly divided into three paths. One is the radical one, represented by MicroStrategy, which directly builds business around Bitcoin, and its imitators are mostly crypto companies; the other is the conservative one. Giants such as Microsoft and Amazon pursue stability and security , hold a wait-and-see attitude and will not easily get involved; there is another category that is in the middle zone and chooses to hold Bitcoin. They all focus on their main business, but their attitude subdivisions are also different, or they regard Bitcoin as a tool for asset allocation. One link, such as Tesla and SpaceX led by Musk, Tesla now holds Bitcoin 9720 Coin , or to cooperate with the business to influence speculation. This type is mainly for companies with limited business growth.

But for now, the divergent attitudes of technology companies will not affect the excitement of the market. Although the giants remain cautious, other companies pursuing profits will obviously not slow down. After all, the Bitcoin strategy is simple and easy to implement, and it is also Can obtain rare growth benefits. Broadly speaking, during the term of the crypto-supporting government led by Trump, Bitcoin will most likely have the same hype potential as AI in the U.S. stock market, representing a new value-added direction, whether for brand marketing or asset allocation. Or in order to stabilize stock prices, many companies, especially listed companies that encounter bottlenecks in their main business, will not give up easily under the possible growth spiral. Therefore, as the mainstreaming of encryption evolves, the layout of enterprises will only increase day by day. Even if they are not giants, they still represent a wide range of huge cash flows.

On the other hand, the Trump effect continues. On December 15, Trump once again stated in an interview that he would establish a Bitcoin strategic reserve similar to an oil reserve and would "do some great things in the cryptocurrency field." In line with expectations, with strong support from policy, the bullish trend in the crypto market will remain quite strong. The market has given its vote, and the dense price band among Bitcoin holders is rising from $95,000 to $100,500.