MicroStrategy 91% Likely to Join S&P 500 if Bitcoin Holds

MicroStrategy, the company led by Michael Saylor, is on the cusp of qualifying for inclusion in the S&P 500 index. According to financial analyst Jeff Walton, there is a 91% chance that MicroStrategy will meet the criteria for inclusion in the second quarter of this year. This assessment is contingent on Bitcoin not experiencing a drop of more than 10% before the end of June.

For MicroStrategy to qualify, it must demonstrate cumulative positive earnings over the past four quarters. Currently, the company has posted net losses in the past three quarters. However, the implementation of accounting rule ASU 2023-08, which mandates the revaluation of Bitcoin holdings at fair market value, has the potential to turn these losses into gains. This rule, effective from January 1, 2024, requires that any gains or losses from Bitcoin holdings be reflected in the company's net income or loss each reporting period.

Walton's forecast is based on the current trading price of Bitcoin, which was $106,044 at the time of his analysis. He also considered the historical odds of a 10% drop in Bitcoin's price over a six-day period since September 17, 2014. With six days remaining in the second quarter, Walton believes that the probability of Bitcoin not dropping more than 10% is high. He noted that over any six-day period, Bitcoin has dropped more than 10% only 8.7% of the time, while it has remained above a 10% drop 91.3% of the time.

As the end of June approaches, the probability of Bitcoin not experiencing a significant drop increases. Over five days, there is a 92.4% chance that Bitcoin will not fall by more than 10%. This probability rises to 93.4% over four days, 94.5% over three days, 95.8% over two days, and 97.6% over one day. However, recent geopolitical tensions between Iran and Israel caused Bitcoin's price to drop below $100,000 on Sunday for the first time since early May. At the time of publication, Bitcoin was trading at $106,200.

If MicroStrategy successfully qualifies for the S&P 500, it would be the second crypto firm to join the index this year. In May, crypto exchange Coinbase was added to the S&P 500, marking a significant step toward broader acceptance of the industry. Meryem Habibi, chief revenue officer of Bitpace, commented that this inclusion "cements the legitimacy of an entire asset class."

In December 2024, Nasdaq announced that MicroStrategy would be included in the Nasdaq-100 Index, which features the 100 largest stocks by market capitalization on Nasdaq. This inclusion further solidifies MicroStrategy's position as a leading player in the crypto industry.