MicroStrategy's Bitcoin Cash Exceeds Cash Held by 80% of S&P 500 Non-Financial Companies

MicroStrategy’s massive Bitcoin value ( BTC ) has exceeded what most S&P 500 companies hold in their treasuries. The Nasdaq-listed e...


MicroStrategy’s massive Bitcoin value (BTC) has exceeded what most S&P 500 companies hold in their treasuries.

The Nasdaq-listed enterprise software company purchased An additional 5,050 Bitcoins for around $ 242.9 million, bringing the value of its 114,042 BTC to nearly $ 5.3 billion. This turns out to be more than 80% of non-financial S&P 500 companies have in their coffers, data shows compiled by Bloomberg.

Business cash flow spending on the rise

MicroStrategy has made buying Bitcoin its official business strategy in 2020, with famous CEO Michael Saylor calling the move defense against potential devaluation of the US dollar. Companies like Tesla and Square then copied the strategy of replacing part of the cash reserves with Bitcoin.

On the other hand, companies with a low appetite for risk continued to increase their liquidity. For example, in the second quarter, non-financial corporations in the S&P 500 boosted their cash flow by 12% from a year ago due to growing uncertainty caused by the COVID-19 pandemic.

S&P 500 non-financial corporations’ cash holdings in recent quarters. Source: Bloomberg

Some of those companies, including General Electric, Ford and Boeing, started spending money in the current third quarter. For example, in July, non-financial corporations in the S&P 500 reduced their dollar reserves by $ 30 billion, or 2%, from a year ago.

At a time, companies like Amazon and Alphabet (Google’s parent company) were still accumulating cash but didn’t do much to change overall spending to dollars. Total cash stocks held by U.S. corporations fell to $ 1.52 trillion from $ 1.55 trillion when acquiring new companies, buying back shares and increasing dividends, Bloomberg data reveals.

Overall, the downward trend in cash holding shows that publicly traded companies have become more comfortable spending their money, due to expectations that the COVID-19 pandemic is almost over.

MSTR gives de facto Bitcoin exposure

MicroStrategy Actions have jumped nearly 359% in the past 12 months, at the same pace as Bitcoin, whose value jumped 314% in the same period.

Since the appreciation of the MSTR has outpaced the growth in Bitcoin’s price, some analysts believe that owning shares provides investors with easier exposure to the benchmark cryptocurrency market through traditional infrastructure.

MicroStrategy vs. Bitcoin vs. Nasdaq. Source: Ecoinometry

“It’s no secret that the MSTR is rated above the NAV [net asset value] coins currently held, and I don’t think investors are buying it for the rise of the legacy business ”, noted Kingdom Capital analyst.

“The [clearest] the reason I can see is that it is one of the few companies with a large market cap in the BTC space.

For example, the Amplify Transformational Data Sharing ETF, which manages investments worth $ 1.2 billion, has won 6.5% exposure in MSTR after snob Grayscale Bitcoin Trust, the primary Bitcoin investment vehicle in the United States that trades over-the-counter, preventing it from receiving capital from certain funds and exchange-traded funds.

Likewise, the Siren Nasdaq NexGen Economy ETF is exposed to MSTR but does not hold GBTC.

Related: MicroStrategy action turns bullish with MSTR, a Bitcoin “proxy” for institutional investors

As a result, MicroStrategy and Bitcoin stock prices should follow a synchronized trend, unless other crypto stocks are available. Kingdom Capital weighed in:

“There appear to be better vehicles available to investors for BTC stocks, and as they become more widely available I expect some ETFs to reduce their exposure to MSTR.”

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