MicroStrategy's persistent struggles: Why does the Bitcoin whale holding $59 billion get rejected by the S&P 500?

Despite holding Bitcoin valued at up to 59 billion USD, far exceeding its market cap of 45 billion USD, MicroStrategy’s stock still plummeted nearly 50% in 2025, making it the worst-performing component of the Nasdaq 100. This brutal decline not only triggered fierce criticism from multiple economists including Peter Schiff regarding its “Bitcoin-backed” corporate strategy but also clearly exposed the “high wall” between MicroStrategy and the S&P 500 index.

This article delves into the underlying reasons for the severe divergence between MicroStrategy’s stock price and its Bitcoin assets, revealing the essence of its business model as a “Bitcoin proxy” and the perilous situation of its market value and net asset value ratio falling below 1.0, providing a comprehensive perspective on the unique position of this world’s largest publicly listed Bitcoin holder.

Glory and Collapse: MicroStrategy’s “Ice and Fire” in 2025

2025 was undoubtedly a year of continued bullish momentum for global stock markets. The S&P 500 index sustained its strength from the previous two years, recording an approximate 17.3% increase for the year, marking the third consecutive year with over 17% annual positive returns. However, beneath this prosperity, dark currents surged, with some constituent stocks suffering heavy losses due to company-specific difficulties or market environment changes. Payment giant Fiserv plunged about 70% after missing earnings expectations, lowering guidance, and facing customer complaints; digital advertising firm The Trade Desk declined nearly 68% amid slowing revenue growth, intensified competition from major tech companies, and executive departures; biotech company Sarepta Therapeutics tumbled over 80% following patient deaths related to its gene therapy and regulatory warnings. These bleak cases remind investors that even in a bull market, betting on the wrong targets carries significant risks.

Against this market backdrop, a non-S&P 500 constituent—MicroStrategy—has been repeatedly compared to the “laggards” within the index due to its extreme performance. MicroStrategy’s stock experienced a dramatic rollercoaster in 2025. Early in the year, its price hovered around $300, then rebounded strongly in the first quarter with a 50% increase as Bitcoin’s price surged. By July 16, 2025, it hit an intra-year high of $457.22. However, as Bitcoin’s price retreated in the second half and overall market risk appetite shifted, this rally abruptly ended. By late September, its year-to-date gains had been completely wiped out.

The downward momentum intensified in the fourth quarter. On December 31, 2025, MicroStrategy’s stock hit a yearly low of $151.42, closing at $151.95. This closing price represented a decline of approximately 49.35% for the year, making it the worst-performing stock in the Nasdaq 100, which is filled with large tech giants. Ironically, this bleak stock performance starkly contrasted with the company’s unwavering “faith” and holdings in Bitcoin. As of the end of December 2025, MicroStrategy’s Bitcoin holdings had increased to 672,497 coins, with an average purchase cost of about $75,000 per coin. At the current market price of approximately $87,800, this portfolio’s total value is about $59 billion, yielding an unrealized gain of roughly 17%.

Core Controversy: Bitcoin Holdings or Business Model as the S&P 500 Entry Barrier?

The severe divergence between MicroStrategy’s stock and its Bitcoin assets raises a fundamental question: Is it the Bitcoin itself or the company’s unique business model built around Bitcoin that hinders its entry into the S&P 500, often regarded as a barometer of the US economy? Recently, well-known gold advocate and economist Peter Schiff took to social platform X again, pointing out that if MicroStrategy were an S&P 500 component, its 47.5% annual decline would make it the worst-performing stock of the year. Schiff sharply criticized that the company’s aggressive Bitcoin accumulation strategy sacrifices shareholder interests, and its stock collapse directly contradicts the notion that “buying Bitcoin is the best corporate strategy.”

On the surface, MicroStrategy appears to meet the core requirements for inclusion in the S&P 500 in the second half of 2025. Thanks to the paper gains from Bitcoin, the company achieved profitability metrics; its market cap has long remained in the hundreds of billions of dollars, well above the index’s minimum threshold. However, the S&P Dow Jones Indices committee’s decision is not a simple automated process. The committee has discretionary authority in selecting companies, prioritizing those with substantial operational businesses rather than entities resembling investment vehicles.

Analysts generally believe that this is the key obstacle MicroStrategy faces. Today, MicroStrategy increasingly resembles a pure “Bitcoin proxy,” with a business model similar to a closed-end fund—mainly seeking value appreciation through holding and trading a single asset (Bitcoin), rather than generating revenue through selling products or services. This structure itself does not meet the S&P 500’s definition of an “operating company.” In contrast, companies like Tesla or Block, while also holding significant Bitcoin, have diversified core valuations and revenue streams derived from electric vehicle manufacturing, digital payments, and other broad operational businesses. The index committee has historically been cautious about companies whose valuation is primarily driven by treasury assets rather than core operations.

Historically, sharp stock price declines do not automatically disqualify a company from remaining in the S&P 500; many constituents have recovered from major setbacks. Similarly, soaring stock prices do not guarantee automatic inclusion; the committee evaluates a company’s business sustainability, volatility, and fundamentals before deciding. For MicroStrategy, the issue is not the magnitude of its stock fluctuations but the nature of its business model—whether it is a tech company providing business intelligence software or a “specialty thematic fund” heavily leveraged on Bitcoin prices. Market performance and the committee’s potential stance seem to lean more toward the latter.

The Edge of Danger: What Does the mNAV below 1.0 Mean for MicroStrategy?

Beyond the debate over S&P 500 inclusion, MicroStrategy is approaching a more urgent market warning line—the market value to net asset value ratio falling below 1.0. This indicator is closely watched because it directly reflects the market’s “Bitcoin premium” or “discount” on MicroStrategy’s stock.

MicroStrategy key financial and Bitcoin holdings data (as of end-2025)

• Number of Bitcoins held: 672,497 coins
• Average cost per Bitcoin: about $75,000
• Total Bitcoin holdings value (at market price): about $59 billion
• Company’s basic market cap: about $45 billion
• Diluted market cap: about $50 billion
• Market cap to net asset value ratio: about 1.02
• 2025 stock price decline: 49.35%
• 2025 Bitcoin holding return: 23.2%

MicroStrategy’s investment logic has long been based on the premise that its stock trading price should be above the net value of its Bitcoin holdings. This is because holding the stock offers investors the convenience of gaining Bitcoin exposure through traditional securities accounts, avoiding the hassle of directly safekeeping private keys, and possibly enjoying certain tax or accounting advantages. Therefore, mNAV is usually greater than 1.0. However, when this ratio drops below 1.0, it indicates that the market values MicroStrategy below the liquidation value of its Bitcoin reserves. Theoretically, buying Bitcoin directly would be cheaper than buying MicroStrategy stock.

This situation can trigger serious negative spiral risks. First, MicroStrategy’s core financing method for continuously increasing Bitcoin holdings—issuing new shares—will face significant challenges. If the stock continues trading below asset net worth, equity financing becomes difficult and may cause severe dilution for existing shareholders, as more shares need to be issued to raise equivalent funds. Second, the rationale for investors holding the stock weakens, potentially leading to sell-offs that further depress the stock price and mNAV. Management is clearly aware of this risk. Recently, the company raised $747.8 million through its “market-linked issuance” plan. The company claims this reserve is sufficient to cover about 21 months of dividends and interest payments, alleviating the pressure to sell Bitcoin for debt repayment during market stress. Executives repeatedly emphasize that selling Bitcoin is a “last resort,” only considered if other financing channels are exhausted and the company’s valuation remains below its asset base.

However, another more severe threshold lurks below: if Bitcoin’s price falls below MicroStrategy’s average cost basis (around $74,000), the company’s holdings will face unrealized losses. While some long-term Bitcoin believers may see this as an opportunity to buy more, traders who do not fully subscribe to Michael Saylor’s strategy might panic-sell, exacerbating stock volatility. The vulnerability of MicroStrategy’s stock lies precisely in its value being highly tied to Bitcoin, yet also suffering from additional risk discounts due to its own financial structure (such as debt and dilution expectations).

The Debate of the Model: Corporate Holding of Bitcoin—“Red or Black”

MicroStrategy’s case has become a highly controversial example in corporate treasury management strategies. It raises a strategic question: how should listed companies allocate Bitcoin and other crypto assets? Should they see it purely as treasury assets and a store of value, like MicroStrategy’s “all-in” approach, or as part of a diversified investment portfolio that does not overshadow core business?

Supporters argue that MicroStrategy is a steadfast practitioner of the “Bitcoin-first” corporate theory. In a macro environment where fiat currencies may depreciate, strengthening the balance sheet with Bitcoin assets is a responsible move for long-term shareholder value. Michael Saylor himself often demonstrates that his Bitcoin holdings far exceed his stock market value, providing a “margin of safety.” However, critics like Peter Schiff point out that this strategy shifts the company’s focus, causes stock volatility to far surpass Bitcoin’s, and exposes shareholders to unnecessary leverage and dilution risks. The market’s current pricing seems to lean more toward the critics’ view, discounting MicroStrategy’s business model accordingly.

For other listed companies considering entering the crypto space, the lessons from MicroStrategy may be balancing and transparency. Tesla’s approach—using Bitcoin as part of cash reserves while maintaining leadership in electric vehicles and clean energy—may be easier for traditional capital markets to understand and accept. After all, the attitude of the S&P 500 committee has made it clear that a healthy, diversified, and sustainable operational business is the cornerstone for gaining permanent access to mainstream capital, rather than merely holding a large, single asset position.

Background: How the S&P 500 Inclusion Mechanism Works

The S&P 500 index does not simply include the 500 largest US companies by market cap. Its inclusion process is managed by the S&P Dow Jones Indices committee, which follows a set of publicly available but discretionary criteria. Core quantitative thresholds include: being a US company, having a market cap generally not less than $16.1 billion, positive earnings in the most recent quarter and over the past four quarters, and sufficient liquidity. However, meeting all these conditions is necessary but not sufficient.

The committee makes the final decision with discretion, emphasizing the company’s representativeness (whether it reflects key sectors of the US economy), business sustainability, and industry classification. One of the most critical subjective principles is that the company must be an “operating company,” meaning most of its revenue and value should come from the sale of goods or services, not passive holdings of financial assets. This explicitly excludes entities like closed-end funds, holding companies, certain trusts, and entities like MicroStrategy that are highly concentrated in holding a single financial asset (even if that asset is Bitcoin). Historically, even Berkshire Hathaway, known for investments, was included based on its substantial insurance, railroad, and energy operations, not its stock portfolio.

Further Reading: Two Models of Corporate Bitcoin Holdings

Since 2020, listed companies holding Bitcoin have generally fallen into two main models. The first is the “MicroStrategy model,” or “aggressive reserve assetization.” Its features include elevating Bitcoin to a core financial strategy, continuously purchasing large amounts, sometimes financed through debt or equity issuance, aiming to transform the company into a “Bitcoin proxy” or “theme investment.” Its balance sheet experiences significant fluctuations with Bitcoin price volatility.

The second is the “Tesla model,” or “diversified cash management.” It treats Bitcoin as part of the company’s cash and cash equivalents, used to hedge against fiat currency depreciation, with moderate trading activity. The company’s core valuation and revenue streams are independent of Bitcoin, and holding crypto assets does not affect its fundamental status as an operating company. The former is highly volatile and narrative-driven; the latter is more stable and easier to integrate into traditional corporate governance. Investors essentially choose which corporate treasury philosophy and future crypto outlook they prefer.