In an unexpected turn of events during the evening of Monday in Beijing, shares of MicroStrategy, a renowned player in the realm of Bitcoin-related securities, soared nearly 6% in premarket tradingThis surge followed the announcement from NASDAQ regarding its annual index adjustments, which officially included MicroStrategy in the NASDAQ-100 index after the previous Friday's closingThis significant development is set to take effect at the opening of trading on December 23, marking a key moment for the company.

What this inclusion signifies is monumental because it mandates major funds, including the fifth-largest ETF in the world, the Invesco QQQ Trust—boasting assets exceeding $320 billion— to allocate shares of MicroStrategy by the week's endThus, investors worldwide, including those in China, will have an indirect ownership stake in Bitcoin through these ETF channels.

The underlying mechanics of this move have sparked intrigue among industry insiders regarding the so-called Bitcoin "upward spiral" logic

However, it’s essential to clarify that buying MicroStrategy stock merely as a speculative vehicle for Bitcoin is not a financially sound strategyBy the end of last week, MicroStrategy’s market capitalization stood at around $97.9 billion, with analysts suggesting a potential breakthrough of the $100 billion mark come Monday’s opening.

As part of its aggressive Bitcoin acquisition strategy over the past month, MicroStrategy has added nearly 150,000 Bitcoins to its portfolio, bringing its total holdings to 423,650 BitcoinsIf we hypothetically evaluate Bitcoin’s price at $100,000 each, the total value of these holdings wouldn’t exceed $42.4 billionThis reverse calculation implies that purchasing MicroStrategy shares equates to paying over $200,000 for each BitcoinGiven the inherent volatility in the crypto market, any adverse market sentiment could lead to a more significant downturn in MicroStrategy’s stock compared to Bitcoin itself.

Interestingly, before establishing itself as a Bitcoin proxy, MicroStrategy was primarily known as a software sales company

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The revenue from its software sales over the previous four quarters was less than $500 million, and the company reported a staggering loss of $340 million for the last quarter ending September 20—marking its third consecutive quarter of losses.

Michael Saylor, the executive chairman who spearheaded the company's foray into the cryptocurrency landscape, asserted earlier this month that MicroStrategy's mission is to become the "securitized Bitcoin." He articulated the company’s role as a bridge that connects traditional capital markets—like stocks, bonds, and options—to the burgeoning world of the crypto economySaylor views Bitcoin as a pivotal instrument in achieving this integration.

Moreover, Saylor's support for the cryptocurrency sector has birthed concepts such as "Bitcoin as a national reserve" and "Bitcoinization of U.Sdebt," all of which have contributed to driving Bitcoin's price beyond the notable $100,000 threshold

Market watchers are now attuned to how MicroStrategy could propel Bitcoin’s price through a cyclical mechanism that resembles "walking on two legs." This cycle suggests that as stocks of MicroStrategy rise due to investments from ETFs like QQQ, the company can leverage its increasing stock value to purchase more Bitcoin, which in turn cycles back to lifting the stock price further.

Matthew Dibb, CEO of Astronaut Capital—a digital asset management firm—made a compelling observation regarding this chain reactionDibb explained that ETFs such as QQQ would procure MicroStrategy shares, thereby stimulating the stock priceThis, in turn, would enable MicroStrategy to finance the acquisition of more Bitcoin using various instruments like debt and equity offerings.

The palpable impact of MicroStrategy's Bitcoin purchases is substantialThe company’s stock has surged more than thirty-fold since Saylor initiated the Bitcoin buying spree in 2020, with an extraordinary rise of over 540% just this year alone.

However, vigilance is warranted

NASDAQ's decision to include MicroStrategy in a closely monitored index has sparked extensive discussions, especially in light of the infamous "index fund disaster" that occurred earlier this yearThis incident involved Micron Technology, whose stock suffered a sharp decline following its addition to the S&P 500 index.

Since being inducted into the index in March, Micron's market capitalization has fallen dramatically, erasing almost $50 billion, leaving its market cap at a disheartening $21.3 billion as of last week's close.

As the financial markets remain turbulent, MicroStrategy’s inclusion in the NASDAQ-100 index has been overshadowed by Micron’s recent misfortune of being removed from the indexThis juxtaposition has created a sense of unease among investorsAs of the time of this writing, Micron's premarket stock performance has tumbled more than 11%, prompting analysts to speculate that it might struggle to maintain a market value above the crucial $20 billion mark