Bitcoin proxy MicroStrategy to join the Nasdaq 100 and heavily traded ‘QQQ' ETF

• MicroStrategy, which has become a play on bitcoin, will be joining the Nasdaq 100 index, effective Dec. 23.
• Exchange-traded funds that follow the index – including the popular Invesco QQQ Trust – will become automatic buyers of the stock.
• Shares of MicroStrategy have soared more than 500% in 2024.

MicroStrategy, the preferred high beta play on the price of bitcoin, will join the Nasdaq 100 index, a move that could further increase demand for the controversial stock that has been on a torrid run this year alongside the price of the cryptocurrency.

The Nasdaq 100 comprises 100 of the largest nonfinancial companies in the tech-focused Nasdaq Composite index. A stock's addition means that ETFs – including the highly popular Invesco QQQ Trust, which has $325 billion in assets – will become automatic buyers as well.

Shares of the bitcoin proxy could be set to gain off the move. They're up more than sixfold this year, compared with bitcoin's nearly 140% gain in the same period.

The change, which will become effective before the market open on Dec. 23, was announced Friday after the stock market close. MicroStrategy was widely telegraphed as a potential contender for membership by investors who were looking forward to the index's rebalancing this week.

"This would lead to inclusion of MSTR in some of the largest ETFs such as QQQ (5th largest ETF) etc, leading to one-time fresh buying … and ongoing participation in future inflows," said Gautam Chhugani, an analyst at Bernstein, in a note this week ahead of the reshuffle.

Additionally, "the market will likely set its sight on S&P 500 inclusion for 2025," Chhugani said. "Currently, due to profitability of its software business, it may be challenging to be considered for S&P 500 inclusion."

The Nasdaq changes the constitution of the Nasdaq 100 index annually. The companies selected for inclusion are based largely on market cap rankings on the last trading day of November, which was Nov. 29 this year. Stocks must also meet eligibility requirements around liquidity and the free float percentage of their shares.

MicroStrategy originally sold enterprise software, but the firm has increasingly become a bitcoin holding company. It first added bitcoin to its balance sheet in 2020, with Michael Saylor as CEO at the time, and has been leaning into that strategy in the years since. MicroStrategy now issues convertible notes to leverage its purchases, and its stock's daily trading sometimes looks like a more volatile version of bitcoin.

The company now has a market cap of roughly $90 billion despite having less than $500 million in revenue over its previous four quarters, according to FactSet. Saylor told CNBC's "Squawk Box" earlier this month that he sees the company's role as "securitizing bitcoin."

"Primarily, our job is to bridge the traditional capital markets that want bonds, or they want fixed income, or they want equity, or they want options, and we plug that into the crypto economy. And we use bitcoin as the vehicle to do that," said Saylor, who is now the company's executive chairman.

MicroStrategy began cranking up its purchases after the U.S. presidential election. The victory of pro-crypto President-elect Donald Trump — specifically his promise to establish a national strategic bitcoin stockpile — has propelled bitcoin to new all-time highs, achieved in part by the company's purchases. MicroStrategy now owns 423,650 bitcoins. It bought 149,880 of them in four different purchases over the past month, beginning Nov. 11.

As part of MicroStrategy's hot streak this year, activists have been pushing bitcoin investing as an agenda item in shareholder meetings at companies like Microsoft and Amazon. Mining stocks like Mara Holdings have also begun employing Saylor's bitcoin yield strategy.

Palantir Technologies and Axon Enterprise will also be joining the Nasdaq 100 later this month. Illumina, Moderna and Super Micro Computer will be removed from the index.

Last year, the Nasdaq 100 added six companies in its annual reconstitution, including DoorDash. Five of those six stocks rose the Monday after the announcement, with an average move of 1.21%.

—With reporting by Jesse Pound.