Strategy and MSCI: Index Exclusion Risk
New MSCI rules could push Strategy, holder of 848,250 BTC, out of indexes. MSTR falls over 6% as passive funds face selling.
Key Takeaways
- Strategy holds 848,250 BTC and could drop out of MSCI indexes going forward.
- Passive funds would then have to sell; MSTR shares are down more than 6% on Friday.
- Whether Strategy is actually affected will be clear no earlier than November 11.
Investors who buy bitcoin through listed companies often overlook a problem: a company that holds almost nothing but bitcoin fits poorly into classic equity indexes. MSCI is now turning that into a rule. Strategy, the largest publicly traded bitcoin holder, is under pressure as a result. MSTR shares are down more than 6% on Friday, while BTC trades around $81,500.
Passive funds are the lever
The real mechanism sits with index funds. A fund tracking an MSCI index does not buy and sell on its own judgment; it follows the index composition. If a stock leaves the index, the fund has to dump it. Strategy put the holdings of such funds at roughly 13 million MSTR shares in September and portrayed the consequences as manageable. At the same time, the company called the rule change misguided. How large the selling pressure ultimately becomes remains open.
Some background: according to Bitcoin Magazine, Strategy owns 848,250 bitcoin, currently worth about $69.2 billion. The former software vendor has effectively become a bitcoin vehicle. That is exactly the kind of structure MSCI is targeting.
What MSCI decided and what is still missing
On Thursday, MSCI said, per Bitcoin Magazine, that it will adopt the rule with minor changes following the consultation that began in August. It takes effect at the close on November 30 and will be applied in the November index review. A removal of Strategy has not been decided yet; it depends on future reviews.
BTC-ECHO describes how the screening works: MSCI looks at the share of operating assets and five further financial metrics. If a company fails at least four of the five tests, it faces removal. The final list is due on November 11. Besides Strategy, Metaplanet and Upexi are seen as at risk; Sharplink, DeFi Development Corp. and Ton Strategy Company are only on a watch list for now.
Strategy publicly opposed the plans in August, saying bitcoin does not need MSCI. The company had not responded to the final decision at first.
What momentum says
Momentum signals short-term weakness for bitcoin: on the hourly (1h), four-hour (4h) and daily (1D) timeframes, the reading is bearish. On the weekly (1W) timeframe, momentum remains bullish. Short-term pressure thus meets a higher-level trend that is still intact so far. The snapshot dates from October 17 at a price of $81,615 and is not investment advice.