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

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

The Nasdaq-listed enterprise software company bought 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 higher than 80% of non-financial companies in the S&P 500 hold in their coffers, according to data compiled by Bloomberg.

Business cash flow spending on the rise

MicroStrategy has made buying Bitcoin its official business strategy in 2020, with its famous CEO, Michael Saylor, calling the move a defense against the 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 companies in the S&P 500 increased their cash positions by 12% from a year ago due to escalating uncertainty caused by the COVID-19 pandemic.

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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 the same time, companies like Amazon and Alphabet (Google’s parent company) were still accumulating cash but didn’t do much to change overall spending into dollars. Total cash stocks held by U.S. companies fell to $ 1.52 trillion from $ 1.55 trillion as they bought new companies, repurchased stocks and increased 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.

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MSTR gives de facto Bitcoin exposure

MicroStrategy’s shares have jumped almost 359% in the past 12 months, at the same pace as Bitcoin, whose value has 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 in legacy business, ”analyst Kingdom Capital said.

“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 $ 1.2 billion in investments, gained 6.5% exposure in MSTR after snubbing Grayscale Bitcoin Trust, the leading Bitcoin investment vehicle in the states. -Unis which trades over-the-counter, which restricts it from receiving capital from certain funds and exchange-traded funds.

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

Related: MicroStrategy Stock Goes Bullish With MSTR, A Bitcoin ‘Proxy’ For Institutional Investors

As a result, MicroStrategy and Bitcoin stock prices are expected to follow a synchronized trend, unless more crypto stocks become 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.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of TUSEN. Every investment and trading move involves risk, and you should do your own research before making a decision.