Recently, bitcoin has plummeted, and MicroStrategy is also having a tough time.
MSTR's stock price fell from a high of $474 to $177, a drop of 67%. During the same period, bitcoin dropped from $100,000 to $85,000, a decline of 15%.
Even more critical is mNAV, which is the premium of market capitalization relative to bitcoin net asset value.
At its peak, the market was willing to pay $2.5 for every $1 of bitcoin held by MSTR. Now, this number is $1.1, with almost no premium left.
The previous model was: issue shares → buy bitcoin → stock price rises (because of the premium) → issue more shares. Now that the premium has disappeared, issuing shares to buy bitcoin has become a zero-sum game.
Why did this happen?
Of course, the recent sharp drop in bitcoin is one reason. But the fact that MSTR has fallen so much more than BTC reveals a bigger underlying panic:
MSTR may be kicked out of the world's majorstock indices.
Simply put, trillions of dollars globally are in "passive investment" funds. They don't pick stocks; they mechanically buy all the constituents in the index.
If you're in the index, this money automatically buys you; if you're kicked out, this money must sell you—no negotiation.
This decision is in the hands of a few large index companies, with MSCI being one of the most important.
Now, MSCI is considering a question: When 77% of a company's assets are bitcoin, is it still a normal company? Or is it actually a bitcoin fund disguised as a listed company?
On January 15, 2026, the answer will be revealed. If MSTR is indeed kicked out, about $8.8 billions in passive funds will be forced to exit.
For a company that lives by issuing shares to buy bitcoin, this is almost a death sentence.
When Passive Funds Can't Buy MSTR
What is MSCI? Imagine it as the "exam committee" for the stock market.
Trillions of dollars in global pension funds, sovereign funds, and ETFs track indices compiled by MSCI. These funds don't do research or look at fundamentals; their job is to fully replicate the index—whatever is in the index, they buy; whatever isn't, they don't touch a single share.
This September, MSCI began discussing a question:
If a company's digital assets (mainly bitcoin) exceed 50% of its total assets, can it still be considered a "normal listed company"?
On October 10, MSCI released an official consultation document. The logic is straightforward: companies holding large amounts of bitcoin are more like investment funds than "operating businesses." And investment funds are never allowed into stock indices. Just as you wouldn't put a bond fund into a tech stock index.
What is MicroStrategy's current situation? As of November 21, the company held 649,870 bitcoins, worth about $5.67 billions at current prices. The company's total assets are about $7.3-7.8 billions. Bitcoin accounts for 77-81%.
Far exceeding the 50% red line.
Even worse, CEO Michael Saylor never hides his intentions.
He has repeatedly stated in public that the software business's quarterly revenue is only $116 million, and its main purpose is "to provide cash flow to service debt" and "to provide regulatory legitimacy for the bitcoin strategy."
What happens if they are kicked out?
According to a November 20 JPMorgan research report, if MSTR is only removed by MSCI, it will face about $2.8 billions in passive fund outflows. But if other major index providers (Nasdaq, Russell, FTSE, etc.) follow suit, the total outflow could reach $8.8 billions.
MSTR is currently included in several major indices: MSCI USA, Nasdaq 100, Russell 2000, etc. Passive funds tracking these indices collectively hold about $9 billions in MSTR stock.
Once removed, these funds must sell. They have no choice; this is stipulated in the fund's charter.
What does $8.8 billions mean? MicroStrategy's average daily trading volume is about $3-5 billions, but this includes a lot of high-frequency trading. If $8.8 billions of one-way selling pressure is released in a short period, it's equivalent to two or three consecutive days of only sell orders and no buy orders.
Note that MSTR's average daily trading volume is $3-5 billions, but this includes high-frequency trading and liquidity provided by market makers. $8.8 billions of one-way selling pressure is equivalent to 2-3 days of total trading volume being all sell orders. The bid-ask spread would widen from the current 0.1-0.3% to 2-5%.
History tells us that index adjustments are ruthless.
When Tesla was added to the S&P 500 in 2020, trading volume in one day reached 10 times the usual. The reverse is also true: when General Electric was kicked out of the Dow Jones in 2018, its stock price fell another 30% within a month after the news was announced.
On December 31, the consultation period ends. On January 15 next year, the official verdict will be announced. According to the current MSCI consultation document rules, being kicked out is almost a foregone conclusion.
The Stock-for-Bitcoin Flywheel Is Stuck
MicroStrategy's core strategy over the past five years can be simplified as a cycle: issue shares to raise money → buy bitcoin → stock price rises → issue more shares.
This model works only if the stock has a premium. If the market is willing to pay $2.5 (mNAV=2.5x) for every $1 of bitcoin held by the company, then issuing new shares to buy bitcoin creates value.
You dilute 10% of the shares, but assets may increase by 15%, so shareholders still profit overall.
At the peak in 2024, MicroStrategy's mNAV did reach 2.5x, even briefly touching 3x. The reasons for the premium included Saylor's execution, first-mover advantage, and the fact that this was a convenient channel for institutions to indirectly hold bitcoin.
But now mNAV has dropped to 1, basically at par.
The market may already be pricing in MicroStrategy's potential removal from MSCI.
Once kicked out of major indices, MicroStrategy will go from a mainstream stock to a niche bitcoin investment tool. A reference case is Grayscale Bitcoin Trust (GBTC), which went from a 40% premium to a long-term 20-30% discount after better bitcoin ETFs emerged.
When mNAV approaches 1, the flywheel stops spinning.
Issuing $10 billions in new shares to buy $10 billions in bitcoin leaves the company's total value unchanged. It's just moving money from one hand to the other, creating nothing except diluting existing shareholders.
The debt financing route is still available; MicroStrategy has already issued $7 billions in convertible bonds. But debt must be repaid, and when the stock price falls, convertible bonds become a pure debt burden rather than quasi-equity.
Saylor's Response and Market Views
Facing the threat of possible removal by MSCI, Michael Saylor responded in his characteristic style.
On November 21, he posted a long article on X, with the core view: MicroStrategy is not a fund, not a trust, and not a holding company. He used linguistic finesse to avoid MSCI's characterization:
"We are a listed operating company with a $500 million software business, adopting a unique bitcoin capital strategy."
He emphasized that funds and trusts only passively hold assets, while MicroStrategy is "creating, building, issuing, and operating." This year, the company completed five public offerings of digital credit securities: STRK, STRF, STRD, STRC, and STRE.
The implication: we're not simply hoarding bitcoin, but engaging in complex financial operations.
But the market doesn't seem to care much about these arguments.
MSTR's stock price trend has already decoupled from bitcoin—not just less correlated, but falling even more than bitcoin. This likely reflects market concerns about its index status.
Cycle Capital partner Joy Lou posted that after a stock is removed, its average daily trading volume may plummet by 50-70% within 90 days.
Even more critical is the debt issue. MSTR has $7 billions in convertible bonds, with conversion prices ranging from $143 to $672. If the stock price falls to the $180-200 range, debt pressure will increase sharply.
Her conclusion is pessimistic. After liquidity dries up, the risk of MSTR falling below $150 will rise sharply.
Other voices in the community analysis are also pessimistic. For example, after MSTR is removed from indices, ETFs will automatically sell, the stock will fall, dragging down BTC, and then a vicious cycle of "Davis double kill" will form.
The so-called "Davis double kill" refers to a sharp drop in stock price caused by declines in both valuation and earnings per share.
Interestingly, all these analysts mention one word in common: passive.
Passive selling by passive funds, passively triggering debt covenants, passively losing liquidity. MSTR has gone from an active bitcoin pioneer to a passive victim of the rules.
The market consensus is becoming clearer: this is not about bitcoin's price fluctuations, but about the rules of the game changing.
Saylor still insists in recent interviews that he will never sell bitcoin. MSTR has proven that companies can go all-in on bitcoin, but the MSCI index may be proving that the cost of doing so is exile from the mainstream market.
Under the 50% Red Line, Is DAT Still a Good Business?
MicroStrategy is not the only listed company holding large amounts of bitcoin. According to MSCI's preliminary list, 38 companies are under observation, including Riot Platforms, Marathon Digital, Metaplanet, and others. They are all watching to see what happens on January 15.
The rule is clear: 50% is the red line. If you exceed it, you are a fund, not a company.
This draws a clear boundary for all DAT companies: either keep crypto holdings below 50% and stay in the mainstream market, or exceed 50% and accept the fate of being exiled.
There is no middle ground. You can't enjoy passive buying from index funds while turning yourself into a bitcoin fund. MSCI's rules do not allow such arbitrage.
This is a blow to the whole model of corporate crypto asset holdings.
In recent years, Saylor has been evangelizing, persuading other CEOs to add bitcoin to their balance sheets. MSTR's success (the stock price once rose tenfold) was the best advertisement, but now that ad is coming down.
In the future, companies wanting to hold large amounts of bitcoin may need new structures. For example:
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Establish an independent bitcoin trust or fund
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Indirectly hold bitcoin by purchasing bitcoin ETFs
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Stay below the "safety line" of 49%
Of course, some think this is a good thing. Bitcoin should not depend on the financial engineering of any one company. Let bitcoin be bitcoin, let companies be companies, each in their own place.
Five years ago, Saylor pioneered the corporate bitcoin strategy. Five years later, it looks like this may be ended by a boring financial document. But this may not be the end, but rather a push for the market to evolve new models.
Because of MSCI's 50% red line, MicroStrategy will not go bankrupt, and bitcoin will not go to zero. But the era of unlimited "issuing shares to buy bitcoin" is over.
But for investors still holding MSTR and various DAT company stocks, do you buy MSTR because you are bullish on bitcoin, or because you believe in Saylor? If it's the former, why not just buy bitcoin or an ETF directly?
After being kicked out of the index, MSTR will become a niche investment product. Liquidity will decrease, volatility will increase. Can you accept that?
The final result will be revealed on January 15, 2026, and the market has already started voting with its feet.
