Bitwise: Don’t worry Strategy will never sell its Bitcoin holdings

Author: Matt Hougan Chief Investment Officer of Bitwise; Compiled by: BitChain Vision

There are a lot of things to worry about in the cryptocurrency space, but Michael Saylor and Strategy selling Bitcoin are definitely not among them.

My inbox is flooded with questions about Bitcoin treasury company Strategy (ticker: MSTR, formerly MicroStrategy).Specifically, people mainly want to know two things:

Will it be removed from the MSCI index, resulting in a forced sell-off of the stock?
Will it be forced to sell its Bitcoin holdings?

Let’s answer them one by one.

MSCI and Strategy

October 10,MSCI announces it is considering removing digital asset treasury companies (DATs) such as Strategy from its investable indexes.The impact of this move is significant – nearly $17 trillion in global assets are benchmarked against these indices.JPMorgan estimates that if Strategy is removed from the benchmark index, index funds could be forced to sell up to $2.8 billion in MSTR shares.

You may be wondering: Why does MSCI do this?The view is that digital asset treasury companies such as MSTR are closer to holding companies than operating companies.MSCI’s investable indexes typically do not include holding companies such as real estate investment trusts (REITs), and because many digital asset treasury companies focus solely on buying and holding cryptoassets, MSCI believes they should not be included in the index.After consultation with clients, MSCI will announce its final decision on January 15.

I can’t predict MSCI’s final decision.As a veteran index practitioner (I spent 10 years editing the academic journal Index Journal), I think both outcomes are possible.Michael Thaler and others have pushed back hard, saying MSTR is strictly an operating company with a robust software business and sophisticated financial engineering around Bitcoin — a sentiment that makes sense and is how I view its business.But this is not a done deal, and some institutions may be inclined to support MSCI’s proposal.Considering the controversial nature of digital asset treasury companies and MSCI’s current attitude towards excluding such companies, I estimate that there is at least a 75% chance that Strategy will be removed from the index.

but iIt is not believed that being removed from the index will have a significant impact on the stock.The scale of the $2.8 billion sell-off may seem huge, but based on my years of experience observing index component stock adjustments, the actual impact of such events is usually smaller than expected, and the market will digest it in advance.For example, when MSTR was added to the Nasdaq 100 in December, funds tracking the index had to buy $2.1 billion in shares, but its stock price barely moved.

I thinkThe slight decline in MSTR’s stock price since October 11 is partly due to the fact that the market has digested the expectation of being “removed from the index” in advance..But for now, no matter what MSCI ultimately decides, stock prices are unlikely to see big moves.

Over the long term, MSTR’s value depends on how well its strategy executes, not whether index funds are forced to hold its shares.

MSTR and Bitcoin

Another question is whether MSTR will sell its Bitcoin.Specifically, the logical chain of market concerns is:

MSTR was removed from the MSCI index;
The stock price plummeted, falling significantly below the net asset value (NAV);
MSTR was therefore forced to sell Bitcoin.

This logic may seem reasonable, but unfortunately for bears, it’s completely wrong.A drop in MSTR’s share price below net asset value will not trigger any mandatory sale of Bitcoins – you can check the details and do the math yourself.

There are two main debt-related obligations of MSTR:Annual interest payments of approximately $800 million, as well as conversion or renewal of certain debt instruments as they mature.

Interest payments are not a immediate concern – the company currently has $1.4 billion in cash, enough to easily cover a year and a half of interest payments.

Likewise, debt conversion is not an issue that needs to be addressed in the near future.The first debt instrument does not mature until February 2027 and is only about $1 billion, a drop in the bucket compared to the $60 billion the company holds in Bitcoin.

If MSTR shares continue to trend lower, will there be pressure from insiders to sell Bitcoin?Not likely.You’d be hard-pressed to find someone more confident in the long-term value of Bitcoin than Michael Saylor himself, who holds 42% of the voting shares.The last time MSTR stock traded at a discount in 2022, he didn’t sell any Bitcoin.

I understand why bears are keen to promote the “death spiral” theory of MSTR – if MSTR was forced to sell $60 billion worth of its Bitcoins at once, it would be truly catastrophic for the Bitcoin market (this is equivalent to two years of inflows into Bitcoin ETFs).But considering the company doesn’t have debt maturities until 2027 and has enough cash to cover interest payments for the foreseeable future, I don’t think that’s going to happen.In addition, we should also look at the problem from a more macro perspective: As of this writing, the price of Bitcoin is about $92,000. Although it is down 27% from its historical high, it is still 24% higher than Strategy’s average purchase price ($74,436) – the so-called “death” does not hold true at all.

Conclusion

If you want to focus on the real things to worry about in the cryptocurrency space, here are a few: For example, I’mBills related to market structure advance slowly in CongressSlightly concerned (although as the government resumes normal operations, I think the pace of progress will accelerate); I am concernedSome smaller, poorly run digital asset treasury companies may go bankrupt; and I thinkDigital asset treasury companies will not buy Bitcoin in large quantities in 2026, which will eliminate an important source of demand in the near term.

But in terms of Strategy:

No need to worry about the impact of MSCI’s decision on its stock price——The impact is smaller than most people expected and is likely to have been priced in by the market in advance;
There is no reasonable mechanism that will force it to sell Bitcoin in the short term——This will never happen.

Strong faith in Bitcoin comes at a price: it requires you to remain calm and patient when market volatility comes.No one knows this better than Thaler and Strategy—because they also understand the flip side: In the long run, this patience will pay off.