Unraveling Bitcoin's Record-Breaking Journey and MicroStrategy's Bitcoin Strategy

Bitcoin's Surge to New All-Time High

On Monday, Bitcoin hit a remarkable new all-time high of more than $107,000. This came after it had risen above $106,000 for the first time just a day prior. The cryptocurrency's upward trajectory has been nothing short of astonishing, capturing the imagination of investors and enthusiasts alike.

The growing optimism surrounding reports that President-elect Donald Trump may be considering establishing a bitcoin strategic reserve has further fueled Bitcoin's ascent. This has led to a surge in demand and a subsequent increase in its price.

MicroStrategy's Bitcoin Purchases and Share Performance

Last week, MicroStrategy announced yet another purchase of $1.5 billion worth of bitcoin. This is part of their ongoing strategy to build a significant bitcoin treasury. The company now owns 439,000 bitcoins, which are currently worth approximately $47 billion at current prices.

MicroStrategy's shares have also seen a significant increase. They were up more than 5% in recent trading on Monday and have gained over 527% year-to-date. The company's bet on bitcoin has had a major impact on its stock performance, with its market cap growing from roughly $1.1 billion in August 2020 to close to $100 billion now.

Bitcoin Prices and Nasdaq 100 Inclusion

Bitcoin's prices have been closely tied to its inclusion in various indices. Its inclusion in the Nasdaq 100 index starting next week is expected to lead to many funds and ETFs purchasing the stock to align their portfolios with the index. This could provide further support to Bitcoin's price.

However, becoming a part of the S&P 500 index may prove to be a more challenging milestone. According to Bloomberg analysts James Seyffart and Eric Balchunas, companies need to have a market capitalization of at least $18 billion, and the S&P has complete discretion in deciding which companies make the cut.

MicroStrategy's Profitability and Accounting Rules

The biggest issue for MicroStrategy currently is its profitability. The company has not turned a profit in the past few quarters, as current accounting rules do not allow them to record bitcoin on their books at fair value. Instead, they are forced to take an impairment loss if bitcoin prices fall.

However, new rules by the Financial Accounting Standards Board (FASB) could change this situation. These new rules allow for capturing some of the upside from rising bitcoin prices, which could potentially improve MicroStrategy's profitability starting from January 2025.