IREN Limited on February 27, after market close participate to the MSCI USA index, which paves the way for index-tracking funds to pick up the shares. The MSCI USA Index is a large, widely followed American stock index that covers approximately 85%contains large and mid-capitalization companies and is the main stock basket for fund managers.
If a company is listed here, it means that a large part of the market considers it important and large enough. Furthermore, index funds will be virtually forced to buy the stocks because they will automatically copy the composition of the index, in a ratio as prescribed by the index.
For Bitcoin miners, diversification is not just a choice, but a compulsion
On behalf of IREN, co-founder Daniel Roberts linked the MSCI move to the development of the company’s AI cloud strategy. IREN shares rose 2.85% after the announcement on February 13, giving the company a market value of about $13.7 billion.
While the news is positive, it should be noted that there is still debate about how index providers should handle cryptocurrency-overweight balance sheets. Just last month, the aforementioned MSCI rejected the plan to exclude from the index companies that are building crypto reserves – that is, companies that have more than half of their assets in cryptocurrencies.. The company told Reuters that further research is needed to distinguish existing companies from purely investment players.
IREN, known for its Bitcoin mining in the renewable energy space, has also started to reposition itself as an AI cloud infrastructure provider. This is now a trend among major miners who are trying to move beyond being seen as barrel miners and instead amplify the data center story. For example, in addition to IREN, Bitdeer Technologies Group is also turning to AI and has begun to accelerate the transition to high-performance computing infrastructure and colocation, that is, it will lease data center capacity and electricity to its customers. Bitcoin’s recent price development only puts more pressure on miners to diversify. Six of the last seven network difficulty adjustments were negative, meaning the network reduced its compute requirements as mining performance dropped. Miners’ earnings, called hashes, were about $35 per petahash.
While IREN’s inclusion in the MSCI USA Index is a big step forward, there are also serious risks, and they could come from several directions. In good times, a lot of money flows into index funds, and in bad times the same money can flow out just as quickly, putting pressure on the exchange rate. Therefore, it is important that IREN properly repositions itself as a data center services provider, i.e. the initiative still needs to prove that it can generate stable revenues. Moreover, MSCI has not ruled out that it will later adjust its rules for crypto-focused companies again.
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