(Bloomberg) -- This year’s crypto rally has been so strong that a software maker, largely viewed as a Bitcoin hedge fund of sorts, now has a stock market capitalization that’s higher than nearly half of the companies in the S&P 500 Index. 

Shares of MicroStrategy Inc., billionaire Michael Saylor’s enterprise-software maker that’s heavily invested in Bitcoin, are up 204% to start year, rising from $632 at the end of 2023 to $1,919 at Wednesday’s close, as the cryptocurrency sits near a record high. For perspective, stock market juggernaut and investor darling Nvidia Corp. is up 82% in 2024. 

As a result, MicroStrategy suddenly carries a market value of more than $32 billion. That makes it bigger than 237 stocks in the 503-member S&P 100 as of Wednesday’s close, including stalwarts like eBay Inc. and Delta Air Lines Inc. 

The company currently is a constituent in the Russell 2000 Index, where members have an average market value of $1 billion. It’s the small-cap index’s second biggest stock after Super Micro Computer Inc., whose $60 billion market value helped it gain entry into the S&P 500 earlier this month.

In this case, however, size may not matter. MicroStrategy can eclipse the valuations of even more S&P 500 firms, but its inclusion in the index is hardly straightforward. In a market increasingly dominated by passive strategies, being part of the main equities benchmark can be crucial for a stock price as investors snap up S&P 500 index funds.

Bitcoin Holding Company

MicroStrategy “is essentially a leveraged holding company for Bitcoin,” said Steve Sosnick, chief strategist at Interactive Brokers. “And because of its unique structure, it doesn’t generate revenues and earnings in the sort of consistent manner that SPX listing criteria require.”

Indeed, the hedge fund Kerrisdale Capital Management LLC said in a note to clients Thursday that it’s short MicroStrategy and long Bitcoin because of the stock’s extreme premium relative to the value of its position in the cryptocurrency. Kerrisdale isn’t alone, several firms have tried to bet against the shares but few have had any luck with it.

Representatives from MicroStrategy didn’t respond to requests for comment.

Read more: MicroStrategy Burns Shorts for $3 Billion as Squeeze Risk Rises

To qualify for the S&P 500, companies need be highly liquid US firms with market capitalizations of at least $15.8 billion. They also must meet profitability, liquidity and share-float standards, must have posted positive earnings in the most recent quarter and over the sum of the trailing four quarters, and must have a certain investable weight factor. 

MicroStrategy doesn’t meet those requirements — for now.

The company, one of the largest publicly-traded holders of Bitcoin, was profitable in the fourth quarter of 2023 after registering a tax benefit related to its horde of the cryptocurrency. But it posted a loss in the quarter before that due to a writedown caused by a decline in Bitcoin’s value.

If MicroStrategy does make it into the S&P 500, it would be one of the index’s largest companies with a direct link to Bitcoin. The firm started snapping up the cryptocurrency as an inflation hedge in 2020, and it currently holds 214,246 tokens valued at around $15 billion. 

With Bitcoin prices holding near an all-time high, it’s joining the index would likely be viewed as symbolically significantly for the $2.6 trillion crypto industry, especially after the spectacular collapse of multiple prominent firms in 2022. It also could be seen as a sign of renewed bullishness toward digital assets, even as many Wall Street banks and professionals continue to shun cryptocurrencies.

--With assistance from Tom Contiliano and Carmen Reinicke.

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