jakiro
Long Yue, Wall Street Insights
A proposal that MicroStrategy (MSTR) may be removed from the MSCI index has triggered a conflict of ideas between cryptocurrency proponents and traditional financial institutions.The storm between the “currency circle” and “Wall Street” is brewing.
Recently, index compilation giant MSCI issued a consultation document proposing to remove “digital asset treasury companies” from its global investable market index.According to MSCI’s definition, such companies refer to companies whose digital asset holdings exceed 50% of total assets, or companies that call themselves digital asset treasury and mainly raise funds for the purpose of increasing their holdings of Bitcoin.
In the filing, MSCI explicitly questioned whether the companies “display characteristics similar to those of investment funds,” which are typically excluded from equity benchmark indexes.This is also the core of this debate: Are these “digital asset treasury companies” innovative operating entities, or investment funds disguised as companies?
This move immediately triggered a chain reaction in the market.Wall Street bank JPMorgan Chase issued an analysis report warning that if MicroStrategy is eliminated, it will put “huge pressure” on its valuation..Analysts at the bank said that of MicroStrategy’s market value of about $59 billion at the time, about $9 billion was held by passive investment vehicles that tracked major indexes.
The bank estimates that MSCI’s actions alone may trigger forced selling of about $2.8 billion in passive funds; if other index providers such as Russell follow suit, the total selling volume may be as high as $8.8 billion.
TD Cowen, another 107-year-old investment bank, also said it expected MSCI to eventually remove all such “digital asset treasury companies” from its indexes.
The “currency circle” strongly resisted and even called for shorting JPMorgan Chase
MSCI’s proposal and JPMorgan’s analysis sparked a backlash on social media and the cryptocurrency community.Some cryptocurrency supporters have publicly called for a boycott of JPMorgan Chase and shorted its stock.They accused the bank of possibly “front running,” that is, taking positions first and then issuing negative reports to profit from them.
The cryptocurrency community believes that Digital Asset Treasury Companies provide restricted institutional investors with a way to track Bitcoin indirectly through stock exposure, and that index exclusions could weaken this channel.Michael Saylor, executive chairman of MicroStrategy, responded that the company is not a fund, trust or holding company, but an operating enterprise with a $500 million software business that uses Bitcoin as “productive capital.”
Meanwhile, MicroStrategy’s founders have fiercely defended their business model.This turmoil is not only about the fate of a company, but may also accelerate the rotation of channels for institutional investors to obtain Bitcoin exposure, from agency stocks to spot ETFs with clearer regulations.
The “housekeeping” of index giants
On the surface, MSCI’s proposal looks like routine “index housekeeping.”In its consultation paper released in October, MSCI clearly raised a fundamental question: Do these companies with large holdings of digital assets “exhibit similar characteristics to investment funds”?
The background to this issue is that mainstream equity indexes often exclude investment vehicles such as exchange-traded funds (ETFs), closed-end funds and investment trusts to ensure that the index constituents are representative of operating companies in the real economy.MSCI’s move is an attempt to clarify whether a software company has crossed the line between an operating company and an investment vehicle when its balance sheet is dominated by Bitcoin.
According to MSCI’s timetable, the final decision on the relevant rules will be announced on January 15, 2026, and is planned to be implemented at the index review in February 2026.This seemingly technical correction could have far-reaching consequences for an emerging stock class.
A debate over “definition”
At the heart of the incident is a profound conflict of ideas about how to define these new types of companies.Bloomberg columnist Matt Levine conducted an in-depth analysis of this and summarized the two opposing views in the market.
Supports the view that it is treated as a common stock:
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They are legally shares.
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Most of them have other businesses besides holding cryptocurrencies (such as MicroStrategy’s $500 million software business) and should therefore be considered operating companies in a special industry.
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For institutions that are unable to invest directly in cryptocurrencies due to compliance restrictions, these stocks provide a legal alternative exposure.
The opposing views are even more pointed:
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They are essentially investment funds, which have historically been excluded from mainstream stock indexes such as the S&P 500.
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The so-called “operating business” is just embellishment, and its stock price mainly reflects the value of its crypto-asset holdings.
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Allowing equity funds to “mix in” crypto assets in this way defeats the purpose of investors purchasing pure equity exposure.
Michael Saylor, co-founder of MicroStrategy, firmly opposes the “fund” label.
He emphasized that the company is not a fund, trust or holding company, but a listed company that uses Bitcoin as productive capital using a unique treasury strategy. How the index classification changes will not affect the company’s operations.He repositioned the company as a “Bitcoin-backed structured finance company” to highlight its operational attributes.
Market Impact: Rotation from proxy stocks to spot ETFs
Regardless of the final definition, MSCI’s move may accelerate a market trend that is already happening: the rotation of institutional capital from “digital asset treasury” (DATs) stocks to spot Bitcoin ETFs.
According to a report by DLA Piper, as of September 2025, more than 200 U.S. listed companies have adopted digital asset treasury strategies, holding approximately $115 billion in cryptocurrencies.These companies provide a convenient “workaround” for traditional financial institutions.But this convenience comes with structural weaknesses, such as when stock prices fall below the net value of their crypto holdings, companies will be under pressure to sell assets to buy back shares.
At the same time, the asset management scale of the spot Bitcoin ETF has exceeded US$100 billion in less than a year since its launch.These ETFs offer purer, less leveraged exposure to Bitcoin and avoid the complex balance sheet issues of treasury stocks.
MSCI’s proposal is therefore a “clearly negative liquidity event” for these proxy stocks.Once an index fund sells MSTR, it will not switch to buying Bitcoin ETF, but will buy other stocks that fill the index gap.Although this does not directly lead to the selling of Bitcoin, the secondary effect cannot be ignored: treasury companies facing stock price and financing pressure may have a weakened ability to purchase Bitcoin in the future, and may even be forced to sell part of their positions.
According to a table compiled by CryptoSlate, in addition to MicroStrategy, crypto mining companies such as Riot Platforms and Marathon Digital have also been included in MSCI’s preliminary watch list, posing potential “long tail” liquidity risks.Ultimately, the turmoil will force the market to decide whether Bitcoin exposure should exist in equity benchmark indexes or be relegated to dedicated crypto investment products.
