Bitcoin Surges Past $107K as MicroStrategy Expands Holdings

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Posted: 17th December 2024

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Bitcoin Surges Past $107K as MicroStrategy Expands Holdings.

Key Insights

On Monday, Bitcoin reached a record high exceeding $107,000, following its initial rise above $106,000 the previous day.

Last week, MicroStrategy revealed an additional acquisition of $1.5 billion in Bitcoin.

While MicroStrategy's shares could potentially increase following their inclusion in the Nasdaq 100, some analysts believe that achieving entry into the S&P 500 may present greater challenges.

Bitcoin has reached a new milestone, surpassing the $107,000 mark amid increasing optimism regarding reports that President-elect Donald Trump might be contemplating the establishment of a bitcoin strategic reserve.

The leading cryptocurrency by market capitalization exceeded the $107,000 threshold on Monday, following its initial breach of $106,000 during late trading on Sunday. In a related development, MicroStrategy, which identifies itself as a bitcoin treasury company, revealed an additional purchase of $1.5 billion in bitcoin.

As a result, MicroStrategy's shares experienced an increase of over 5% in recent trading on Monday, reflecting a remarkable year-to-date gain of more than 527%.

Golden bitcoin coin over defocused stock chart with copy space, Olsztyn, Poland 13 July 2021

Bitcoin Prices and the Inclusion of Nasdaq 100 Impact MSTR Shares

MicroStrategy acquired 15,350 bitcoins in the week concluding on December 15, at an average price of approximately $100,386 per bitcoin, as reported by the company. This acquisition was funded through the sale of MicroStrategy shares.

Currently, the company holds a total of 439,000 bitcoins, valued at around $47 billion based on prevailing market prices. The company's investment in bitcoin has significantly influenced its stock performance. Since the initiation of its bitcoin strategy in August 2020, when its market capitalization was approximately $1.1 billion, MicroStrategy's market cap has surged to nearly $100 billion.

The remarkable increase in MicroStrategy's stock this year has been supported by the rising prices of bitcoin. The cryptocurrency experienced a rally earlier this year, driven by demand from newly established spot bitcoin exchange-traded funds (ETFs), followed by the bitcoin halving and the reelection of Trump, which raised expectations for a more crypto-friendly administration.

Nevertheless, there may still be potential for further growth in MicroStrategy shares. Its upcoming inclusion in the Nasdaq 100 index next week is expected to lead to significant purchases of the stock by various funds and ETFs, including the Invesco QQQ Trust (QQQ), to align their portfolios with the index.

However, analysts James Seyffart and Eric Balchunas from Bloomberg suggest that achieving the next milestone of inclusion in the S&P 500 index may be challenging. Companies must possess a market capitalization of at least $18 billion, but the S&P has complete discretion in determining which companies qualify for inclusion.

MicroStrategy's primary concern may lie in its profitability, as analysts have noted that the company has not achieved profitability in recent quarters.

Nevertheless, a potential shift could occur for MicroStrategy in January 2025. Under the current accounting regulations, companies such as MicroStrategy are prohibited from recording bitcoin at fair value on their financial statements. Consequently, they must recognize an impairment loss when bitcoin prices decline, while gains from increasing bitcoin prices are not accounted for.

This situation adversely affects the company's profit margins. However, new guidelines from the Financial Accounting Standards Board (FASB) will permit the recognition of some benefits from appreciating bitcoin prices.

Cryptocurrency Bitcoin blockchain symbol digital encryption network on circuit board.

Bitcoin's record-breaking surge past $107,000 underscores its growing acceptance as a mainstream asset and a strategic reserve for institutions like MicroStrategy. With increasing optimism surrounding favorable regulatory developments and broader adoption, Bitcoin continues to solidify its position as a digital store of value.

MicroStrategy's unwavering investment highlights institutional confidence in Bitcoin's long-term potential. As regulatory changes, such as FASB's updated guidelines, offer greater clarity, Bitcoin's appeal to corporations and investors is expected to grow. The cryptocurrency's resilience and rising market capitalization signal a bright future, reinforcing its role as a transformative financial asset.