MicroStrategy’s Bitcoin treasury exceeds cash held by 80% of S&P 500 non-financial companies

MicroStrategy’s huge Bitcoin (BTC), holdings have surpassed the value of what most S&P 500 companies keep in their cash treasuries.

Nasdaq-listed enterprise application firm, Enterprise Software, purchased 5,050 Bitcoins for $242.9 million. This brings its total 114,042 BTC holdings up to $5.3 billion. Bloomberg data shows that this is more than the 80% of S&P 500 companies that do not hold cash.

Companies spend more cash

MicroStrategy declared that buying Bitcoin was its official corporate strategy for 2020. Its famous CEO Michael Saylor called the move a defense against the U.S. Dollar’s possible devaluation. Later, Square and Tesla followed the strategy to replace cash reserves with Bitcoin.

Firms with lower risk appetites increased their cash holdings. Due to the increasing uncertainty caused by the COVID-19 pandemic, S&P 500 non-financial firms saw their treasuries rise by 12% in the second quarter compared to the previous year.

Recent quarters, cash holdings of non-financial S&P500 companies. Source: Bloomberg

Some of these firms, including General Electric and Ford, began spending cash in the third quarter. In July, for example, the dollar reserves of non-financial S&P 500 firms was reduced by $30 billion or 2% compared to a year earlier.

Companies like Alphabet (Google’s parent company), and Amazon still had cash, but they did not make any significant impact on dollar spending. Bloomberg data shows that the total cash stockpiles of US corporations dropped to $1.52 trillion, from $1.55 trillion. This was due to new businesses, increased dividends and buying back shares.

The trend of decreasing cash holdings shows that public companies are becoming more comfortable spending their money. This is a result of the expectation that the COVID-19 pandemic will soon be over.

MSTR gives de facto Bitcoin exposure

MicroStrategy shares have risen by nearly 359% over the past twelve months. This is in line with Bitcoin’s value, which has risen by 314% during the same period.

Analysts believe that holding shares will give investors greater access to the benchmark cryptocurrency market via traditional infrastructure, as MSTR appreciation has outpaced Bitcoin price growth.

MicroStrategy vs. Bitcoin vs. Nasdaq. Source: Ecoinometrics

Kingdom Capital analyst said that MSTR has been valued at more than the NAV (net asset value) of coins currently owned. However, he did not believe investors are buying MSTR for its legacy business upside.

“The clearest reason I can see it being in this space is that it has a high market capitalization.”

The Amplify Transformal Data Sharing ETF has 6.5% exposure in MSTR. It manages investments worth $1.2 billion and has nabbed Grayscale Bitcoin Trust, which is the most prominent Bitcoin investment vehicle in America that trades over the counter. This prevents it receiving capital from certain funds or exchange-traded funds.

Similar to the Siren Nasdaq NexGen Economy ETF, it has exposure MSTR but no GBTC.

Related: MicroStrategy stock turns bullish with MSTR, a Bitcoin proxy for institutional investors

Therefore, MicroStrategy stock prices and Bitcoin prices will trend in tandem unless there are more crypto stocks. Kingdom Capital contributed:

“There are better options for investors to trade BTC equities and I expect that some ETFs will decrease their MSTR exposure as they become more accessible.” Each investment and trading move comes with risk and you should do your research before making a decision.

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