Bitcoin News Update: MSCI Index Removal Threatens to Topple MSTR's Fragile Structure

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Bitcoin News Update: MSCI Index Removal Threatens to Topple MSTR's Fragile Structure

Bitget-RWA2025/11/21 04:10

By:Bitget-RWA

- MSCI's potential removal of MicroStrategy (MSTR) from major indices risks triggering $8.8B in passive outflows, worsening its fragile financial position. - JPMorgan warns index exclusion would damage MSTR's valuation credibility and hinder capital raising amid Bitcoin's 30% drop and collapsing stock premium. - MSTR's reliance on high-yield preferred shares has backfired as yields rise to 11.5%, while MSCI's recalibration of float metrics sparks sector-wide uncertainty. - The January 15 decision could res

JPMorgan analysts have cautioned that an upcoming decision by

MSCI Inc.

regarding the possible exclusion of Michael Saylor's

Strategy

(MSTR) from major stock indices could lead to billions of dollars in passive fund outflows, further straining the company's already fragile finances. The index provider's scheduled January 15 review of companies with significant digital asset exposure has left investors on edge, especially since Strategy’s $59 billion valuation is largely supported by its presence in benchmarks such as the Nasdaq 100 and

MSCI

World.

According to the bank’s November 20 report, approximately $9 billion of Strategy’s market value is tied up in passive investment products that follow these indices. Should MSCI remove the firm, it could spark outflows of around $2.8 billion, with total losses potentially reaching $8.8 billion if other index providers follow suit. Such an action would not only erode the company’s valuation but also hinder its ability to secure new funding, JPMorgan’s analysts stated. “Losing a spot in major indices would damage the company’s reputation and cast doubt on Strategy’s access to equity and debt markets,” they wrote

according to the report

This warning comes as Strategy’s share price has already dropped more than 60% from its highest point, mirroring the broader downturn in the crypto sector and declining investor trust.

Bitcoin

, which makes up most of Strategy’s assets, has dropped over 30% from its October peak, while

the ratio of the company’s market value to its Bitcoin holdings

has fallen to 1.1, the lowest level since the pandemic began. The company’s strategy of issuing preferred shares to finance Bitcoin acquisitions has also backfired, as

yields on its 10.5% securities

have risen to 11.5% amid weakening demand.

MSCI has not provided any comments regarding upcoming index adjustments,

stating it "doesn't speculate" on its methodology

. Nonetheless, the company has recently faced questions about its index calculation methods, prompting responses from markets such as Indonesia, which is

looking to revise its free-float rules

to better match international norms. This uncertainty has heightened fears that MSCI’s changes to public float calculations could prompt a wider reassessment of index membership, especially for companies with complex or unstable balance sheets

according to Bloomberg analysis

The consequences for Strategy are critical. The company’s previously high premium over its Bitcoin reserves has disappeared, and it now faces a cash crunch as its preferred shares trade at a discount. JPMorgan analysts noted that being included in major indices has long quietly supported market confidence, attracting passive investment and signaling reliability to large investors.

Being removed would intensify existing weaknesses

, potentially speeding up a “mechanical unwinding” of the company’s story-driven approach.

The impact could reach beyond just Strategy. MSCI’s decision may alter the environment for companies holding digital assets, which have struggled to balance innovation with mainstream acceptance. Similar firms are already selling tokens or taking on debt to survive, while

active managers may face pressure

to shift their portfolios toward more conventional assets.

With the January 15 deadline drawing near, investors are watching closely for any changes to MSCI’s methodology and for signs of how Strategy will handle its financial challenges. For now, the market is in a state of uncertainty, with the outcome

set to challenge the durability

of a sector known for its volatility and reliance on narrative.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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