MicroStrategy Inc.’s inclusion in the Nasdaq 100 has opened up a new investor base for the company, but also poses risks for its stock price. The index-tracking firms are expected to buy around $2 billion worth of shares, according to Bloomberg Intelligence estimates.
While this may be seen as a positive by crypto bulls, it can also work against MicroStrategy’s stock if momentum turns sour. Research by Dimensional Fund Advisors found that index effect can lead to buying when prices are high and selling during lows.
The negative catalyst for MicroStrategy is unclear at the moment. However, analysts warn that the company’s founder Michael Saylor’s frequent share sales to buy Bitcoin may not be sustainable in the long term. “Getting added to a widely-held basket of stocks will likely raise the profile of MSTR,” said Mike Bailey, director of research at FBB Capital Partners. “But this is a double-edged sword, especially if we get a reversal in market speculation for crypto and other high-risk assets.”
MicroStrategy’s unconventional plan to raise capital solely by purchasing Bitcoin has raised questions about its sustainability. The company holds around $45 billion in Bitcoin and has announced multibillion-dollar acquisitions over the past six weeks, surging along with the token’s price.
Source: https://finance.yahoo.com/news/microstrategy-nasdaq-entry-kicks-off-135909903.html