MicroStrategy to Join Nasdaq-100: Tap MSTR ETFs

MicroStrategy MSTR, the world’s largest Bitcoin hoarder, is set to join the Nasdaq 100 index on Dec. 23. The move will offer the cryptocurrency more exposure in the tech-heavy market. The stock is often viewed as a Bitcoin proxy.

A Major Bitcoin Proxy in the Nasdaq 100

MicroStrategy holds an astounding number of 423,650 Bitcoins, making it a unique and volatile addition to the Nasdaq 100. The index comprises the top 100 tech and non-financial companies from the larger Nasdaq Composite index (IXIC), which houses over 2,500 firms.

Impact on ETFs Tracking the Nasdaq 100

Exchange-traded funds (ETFs) that track the Nasdaq 100 will automatically include MicroStrategy in their holdings. For example, the Invesco QQQ ETF QQQ, a popular tech-focused fund with $325 billion in assets, will now acquire shares of MicroStrategy, regardless of investor preference. Other ETFs with such exposure include Invesco NASDAQ 100 ETF QQQM and Direxion NASDAQ-100 Equal Weighted Index Shares QQQE.

MicroStrategy's Stock Surges in 2024

This landmark comes after about a 500% year-to-date rally in MicroStrategy’s stock price. Originally an enterprise software company, MicroStrategy pivoted in 2020 under its founder, Michael Saylor, who has embraced Bitcoin with firm commitment. MicroStrategy's market value has soared to almost $98 billion now.

The company currently holds about $43 billion worth of Bitcoin and continues to acquire more, betting its entire business on the cryptocurrency’s future. Bitcoin is up about 140% this year due to more mainstream acceptance. The cryptocurrency has seen launches of several ETFs earlier in the year and started rallying thereon.

Moreover, President-elect Trump has plans to create a U.S. bitcoin strategic reserve similar to its strategic oil reserve, fueling the enthusiasm of crypto bulls. Crypto bulls are anticipating a friendlier regulatory environment in Trump 2.0 era. Bitcoin has surged more than 50% since the U.S. election on Nov. 5 (read: Trump Win Fuels U.S. Stock Surge, Leveraged ETFs Soar).

China, UK, Bhutan and El Salvador are the other countries with a significant amount of bitcoins, data site BitcoinTreasuries revealed, as quoted on Reuters. Overall, MicroStrategy and Bitcoin are two interlinked plays. The recent addition to the Nasdaq-100 will likely give both a boost.

A Huge Shift for Public Markets

The inclusion of MicroStrategy in the Nasdaq 100 not only reflects the growing acceptance of cryptocurrency but also introduces new volatility to the index. This shift could have extensive implications for both public markets and the broader ETF sector.

But then, if you have a strong stomach for risk, you can invest in MicroStrategy-heavy ETFs to diversify some risks and downsides.

These ETFs include Bitwise Crypto Industry Innovators ETF BITQ, First Trust SkyBridge Crypto Industry & Digital Economy ETF CRPT and Schwab Crypto Thematic ETF STCE, VanEck Digital Transformation ETF DAPP and ProShares Big Data Refiners ETF DAT.

However, there is an ETF called T-Rex 2X Long MSTR Daily Target ETF MSTU, which is an extremely risky choice but has the potential to deliver great returns if the MSTR bull rally continues. The T-Rex 2X Long MSTR Daily Target ETF seeks daily investment results, before fees and expenses, of 200% of the daily performance of MSTR. This ETF is apt for short-term use (see all single stock ETFs here).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research