MicroStrategy (MSTR) is set to join the Nasdaq-100 Index, becoming the first Bitcoin-focused company included in the prestigious list, which tracks the 100 largest non-financial firms on the Nasdaq exchange. Analysts highlight this as a major development for 2024, potentially driving ETF-driven demand for MSTR shares.

However, concerns remain about the company’s future classification. Due to its reliance on Bitcoin holdings rather than its core business, MicroStrategy may be reclassified as a financial firm in March, jeopardizing its spot on the index. Founder Michael Saylor’s vision to transform the company into a “Bitcoin bank” could further distance it from the technology sector.

The index reshuffle takes effect on December 23.

BlackRock, the world’s largest asset manager, recommends limiting Bitcoin investments to no more than 2% of a diversified portfolio, citing the cryptocurrency’s extreme volatility.

Bitcoin’s price has fluctuated dramatically, rising from $43,000 to over $103,000 this year, and crashing from $67,000 to $17,000 in 2021.

In a recent report, BlackRock explains that a 2% allocation aligns with the risk of holding mega-cap tech stocks like the “Magnificent Seven” in a standard 60/40 stock-bond portfolio. The firm suggests using a “risk budgeting approach,” allocating based on how much Bitcoin contributes to overall portfolio risk, considering its volatility and correlations.

While Bitcoin’s long-term prospects are uncertain, BlackRock advises investors to approach it cautiously, given its vulnerability to sharp price drops, and only include it if confident in its broader adoption.