MW Here's how bitcoin is entering investor portfolios through the backdoor

By Jules Rimmer

High passive ownership in MicroStrategy presents a risk to the stock

Many investors are getting exposure to bitcoin whether they want to or not.

New research from JPMorgan finds as much as $50 billion is invested in MicroStrategy $(MSTR)$, the IT company turned bitcoin (BTCUSD) holder, in an indirect way.

JPMorgan's team, headed by Nikolaos Panigirtzoglou, calculates at least $14 billion of shares are owned by mutual funds or exchange-traded funds which are simply benchmarked to an index including MicroStrategy.

This figure may not be comprehensive, JPMorgan adds, because it fails to include funds (passive or active) that own MicroStrategy despite not having these major indices as a benchmark, as well as institutional investors like the Norges Bank and Swiss National Bank that have to track indexes. Adding those in, JPMorgan estimates the true figure could be closer to $50 billion out of a market cap of roughly $100 billion.

"The reliance on passive funds in particular, which at $21 billion constitute 1/5th of the company's ownership, presents a challenge to MicroStrategy as the company's valuation is tied to its inclusion in equity indices, making it susceptible to exclusion if it fails to meet index criteria in the future or if index criteria change," the analysts note.

They further note that MicroStrategy has increasingly been relying on preferred stock, with yields up of up to 11%, rather than common equity financing to raise money for bitcoin purchases.

"Such high yields are only sustainable if the bitcoin price continues to rise steeply in the future. If the bitcoin price fails to achieve sustained and strong annual appreciation in the future, preferred stock issuanceand the MicroStrategy stock price could come under severe pressure," they said.

MicroStrategy shares are up 27% this year, while bitcoin has climbed 12%.

-Jules Rimmer

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June 19, 2025 04:48 ET (08:48 GMT)

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