Strategy’s Bitcoin funding model disrupted by MSCI changes
The specter of an enormous compelled sell-off in crypto-linked equities has been averted.
Nonetheless, that reprieve comes with a structural catch that essentially alters the economics of the “Bitcoin Treasury” commerce.
On Jan. 6, the dominant benchmark supplier for international fairness and ETF markets, MSCI Inc., announced it’s going to retain “Digital Asset Treasury Firms” (DATCOs) in its international indices for the February 2026 evaluate, sparing companies like Technique (previously MicroStrategy) from expulsion.
It acknowledged:
“In the interim, the present index remedy of DATCOs recognized within the preliminary record printed by MSCI of corporations whose digital asset holdings characterize 50% or extra of their whole belongings will stay unchanged.”
Following the information, Michael Saylor, Technique’s govt chairman, touted the victory of remaining within the benchmark.
Nonetheless, the index supplier has concurrently launched a technical freeze on share counts for these entities. It defined:
“MSCI won’t implement will increase to the Variety of Shares (NOS), Overseas Inclusion Issue (FIF) or Home Inclusion Issue (DIF) for these securities. MSCI will defer any additions or size-segment migrations for all securities included within the preliminary record.”
Via this determination, MSCI has successfully severed the hyperlink between new fairness issuance and automated passive shopping for.
This transfer merely meant the “draw back” of a compelled liquidation has been eliminated, however the “upside” mechanics of the index commerce have been dismantled
The tip of the mechanical bid
The rapid market response, a surge of over 6% in Technique’s inventory, mirrored aid {that a} catastrophic liquidity occasion was off the desk.
Notably, JPMorgan steered {that a} full exclusion might have triggered between $3 billion and $9 billion in passive promoting of MSTR.
This quantity would seemingly have crushed the inventory worth and compelled the liquidation of Bitcoin holdings.
Nonetheless, the eliminated risk of exclusion masks a brand new actuality the place the automated demand lever for the shares is gone.
Traditionally, when Technique issued new shares to fund Bitcoin acquisitions, the index supplier would finally replace the share depend.
In consequence, passive funds monitoring the index had been then mathematically compelled to purchase a professional rata portion of the brand new issuance to attenuate monitoring error. This created a assured, price-insensitive supply of demand that helped take in dilution.
Beneath the brand new “freeze” coverage, this loop is damaged. Even when Technique considerably expands its float to boost capital, MSCI will successfully ignore these new shares for index calculation functions.
The corporate’s weight within the index won’t enhance, and consequently, ETFs and index funds won’t be compelled to purchase the brand new paper.
Market analysts notice that this shift forces a return to fundamentals. With out the backstop of benchmark-tracking demand, Technique and its friends should now depend on lively managers, hedge funds, and retail buyers to soak up new provide.
Quantifying the liquidity hole
To grasp the magnitude of this shift, market researchers are modeling the “misplaced bid” that issuers should now navigate.
Bull Idea, a crypto analysis agency, quantified this liquidity hole in a notice to purchasers. The agency posited a hypothetical state of affairs involving a treasury firm with 200 million excellent shares, of which roughly 10% are sometimes held by passive index trackers.
Within the Bull Idea mannequin, if that firm points 20 million new shares to boost capital, the outdated index mechanics would finally mandate that passive funds buy 2 million of these shares.
At a theoretical worth level of $300 per share, that represents $600 million of automated, price-insensitive shopping for strain.
Beneath MSCI’s new freeze, Bull Idea famous that the $600 million bid falls to zero.
Contemplating this, it acknowledged:
“Technique now should discover non-public patrons, supply reductions, or increase much less cash.”
Which means the compelled demand from index funds has been eradicated.
Thus, it presents a major hurdle for Technique, which issued greater than $15 billion in new shares all through 2025 to aggressively accumulate Bitcoin.
If the corporate makes an attempt to duplicate that scale of issuance in 2026, it’s going to achieve this in a market void of passive assist. With out that structural bid, the chance of a worth correction throughout dilution occasions will increase considerably.
ETFs emerge as silent winners
MSCI’s determination to cap these corporations relatively than expel them or depart them alone has additionally considerably altered the aggressive dynamics within the asset administration sector.
Over the previous yr, US spot Bitcoin ETFs have matured as an asset class and have seen important institutional curiosity. In actual fact, this rise led MSCI’s former dad or mum firm, Morgan Stanley, to file for its personal Spot Bitcoin ETF.
From this vantage level, Technique competes with these fee-bearing Bitcoin ETFs, providing buyers a technique to acquire passive Bitcoin publicity via an working firm construction. By freezing the index weighting of DATCOs, the brand new rule degrades their capability to effectively scale through fairness markets.
If Technique’s capability to boost low cost capital is curtailed, massive allocators might rotate capital out of the company fairness and into Spot ETFs, which don’t carry the operational dangers of an organization or the premium-to-NAV volatility.
This movement of funds would immediately profit issuers of spot ETFs, together with main Wall Avenue banks, successfully capturing the charges beforehand mirrored in fairness premiums.
By neutering the “flywheel” impact of the treasury technique, the index supplier might have inadvertently, or deliberately, leveled the taking part in area in favor of conventional asset administration merchandise.
