Strategy Faces MSCI Index Risk Over Bitcoin Treasury Strategy

• The strategy faces MSCI removal risk due to heavy Bitcoin holdings on its balance sheet.
• Index exclusion could trigger billions in passive fund outflows for Bitcoin firms.
• MSCI decision may reshape equity index rules for Bitcoin treasury companies globally.

Strategy, the company led by Michael Saylor, faces possible removal from MSCI stock indexes. The change could reduce demand for its shares and affect other Bitcoin treasury firms. Analysts warn the impact may reach billions of dollars. The decision may also influence how passive investors view equity exposure linked to cryptocurrency holdings.

MSCI raised the issue after receiving concerns from clients about companies with large digital asset positions. In October, the index provider proposed excluding firms whose digital assets account for at least half of total assets. MSCI said such companies resemble investment funds that are not included in its equity benchmarks.

Strategy’s Shift to Bitcoin Puts Its Index Eligibility at Risk

The proposal directly affects Strategy, formerly known as MicroStrategy. The company shifted from software into aggressive Bitcoin accumulation starting in 2020. That move transformed its balance sheet and market profile. Strategy now holds Bitcoin as its primary treasury asset.

Strategy shares surged roughly 3,000% after the Bitcoin strategy began. The rally later reversed as crypto prices weakened and the stock is down about 43% this year. The decline has followed broader losses across the digital asset market.

MSCI is conducting a public consultation on the proposed rule change. A final decision is expected by January 15. Market analysts say the outcome could extend beyond MSCI. Other major index providers may adopt similar standards.

Kaasha Saini, head of index strategy at Jefferies, said the discussion already extends beyond one index. She noted that eligibility of digital asset treasury companies is under broader review. Saini expects many equity benchmarks to align with MSCI’s approach.

Index exclusion carries material consequences for listed companies. Passive asset managers can hold up to 30% of a large company’s freely traded shares. Removal from indexes can force automatic selling. That process may cause sharp outflows in a short period.

Related: Saylor Reveals Bitcoin Truths Shaping a New Global Order

The risk is greater for firms that fund Bitcoin purchases by issuing equity. Strategy has increasingly relied on share sales and debt offerings. Index-driven selling could tighten funding conditions, which may limit future capital access.

Michael Saylor has publicly downplayed the risk. He told Reuters earlier this month that index exclusion would not matter. His view contrasts with later statements from the company.

Analysts Warn of Capital Outflows

In a public letter to MSCI, Saylor and Strategy CEO Phong Le warned of industry-wide effects. They estimated $2.8 billion of Strategy shares could be liquidated. They said the change could chill the digital asset treasury model.

The executives also warned about reduced access to passive capital. They said exclusion would cut firms off from roughly $15 trillion in passive investment assets. The letter argued that such a move would weaken competitive positioning.

Sell-side analysts have published varying estimates. TD Cowen said about $2.5 billion of Strategy’s value is linked to MSCI indexes. It estimated another $5.5 billion comes from other benchmarks. JPMorgan projected $2.8 billion in outflows from MSCI removal alone.

Falling crypto prices have pressured valuations. Some companies now trade below the net asset value of their token holdings. That gap has raised questions about long-term sustainability.

MSCI’s preliminary list names 38 companies at risk. Their combined market value stood near $46.7 billion at the end of September. The list includes France-based Bitcoin buyer Capital B.

Capital B executive Alexandre Laizet said passive ownership remains limited today. He said access to passive flows matters for future growth. Others argue markets have priced in the risk.

Matt Cole, CEO of U.S. Bitcoin buyer Strive, said the proposals were largely expected. He said long-term effects could still raise capital costs. That pressure may shape how Bitcoin treasury companies evolve.

MSCI’s decision will set an important reference point for index inclusion standards. A change could reshape capital flows for Bitcoin treasury companies. It may also influence how equity markets classify firms with large digital asset exposure. The outcome could affect funding strategies and investor access across the sector.