While a recent rebound in cryptocurrency prices has provided short-term support for Strategy (MSTR), the company faces a structural challenge that could have far more significant consequences. An ongoing consultation by index provider MSCI may result in the Bitcoin-heavy firm being ejected from major indices, potentially triggering forced selling worth billions of dollars. The severity of such a move for both the share price and the business model is now under intense scrutiny.
The Core Conflict: A Business Model at Odds with Index Rules
The current debate highlights a fundamental tension. Strategy has deliberately pursued a model of using its corporate balance sheet as a Bitcoin treasury. Traditional index rules, however, are designed to problematize such an extreme concentration in a single, volatile asset. The company recently reinforced this dual strategy—operational business plus massive crypto holdings—by reportedly acquiring an additional 10,645 Bitcoin for approximately $980 million.
Despite this commitment, market reports indicate the premium at which Strategy’s shares have historically traded above their net asset value (NAV) is shrinking. This suggests the market is pricing not just the inherent volatility of cryptocurrency, but also a growing recognition of index-related risk.
The MSCI Consultation: A Potential “Index Cliff”
The immediate pressure stems from a consultation launched by MSCI. The index provider is reviewing a potential rule change, with a decision expected around January 15, 2026. The proposed amendment could exclude companies holding more than 50% of their assets in digital currencies from its indices. Given that Strategy’s balance sheet is now predominantly composed of Bitcoin, it would almost certainly be impacted.
Analysts from JPMorgan and TD Cowen warn of a potential “index cliff” effect. If MSCI indices, and subsequently major benchmarks like the Nasdaq 100 or Russell indices, were to remove Strategy, passive funds tracking them would be compelled to liquidate their positions. JPMorgan estimates these potential outflows could reach a total of $8.8 to $9 billion.
CEO Phong Le and Executive Chairman Michael Saylor have reportedly pointed to potential selling pressure of about $2.8 billion from MSCI-linked vehicles alone. When combined with other indices, the total effect could approach the $9 billion figure cited by JPMorgan, raising substantial liquidity concerns.
Management’s Defense and Mounting Competitive Pressure
The company’s leadership has moved to counter the threat. On December 10, Michael Saylor submitted a twelve-page letter to MSCI. In it, he argues that broadly excluding so-called “Digital Asset Treasury” companies would stifle financial innovation in the United States. He further contends that firms like Strategy are operational businesses, not investment funds, as the current MSCI assessment might imply.
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While Strategy survived the annual reconstitution of the Nasdaq 100 on December 13, retaining its place for now, an MSCI exclusion would represent a deeper, more structural cut. This is because a vast number of global equity mandates and ETF strategies are directly or indirectly linked to MSCI benchmarks.
Competitive pressure is also intensifying. Reports suggest BlackRock’s iShares Bitcoin Trust (IBIT) now holds nearly 4% of all existing Bitcoin. This provides institutional investors with an alternative for Bitcoin exposure that avoids the specific corporate risks associated with Strategy and is more easily integrated into traditional portfolios from a regulatory standpoint.
Technical and Market Context
From a technical perspective, the equity remains under pressure despite a one-day gain of roughly 4% last Friday. On a weekly basis, the stock is still firmly negative, and its year-to-date decline exceeds 50%. The share price currently trades more than 60% below its 52-week high, illustrating the extent to which the market has already discounted risk.
The chart picture remains weak, with the stock trading significantly below its 50-, 100-, and 200-day moving averages; the distance to the 200-day line is close to 50%. Meanwhile, a Relative Strength Index (RSI) reading above 80 signals a short-term overbought condition following the recent counter-rally. This indicates the price action is likely part of a nervous sideways or corrective phase rather than the beginning of a stable upward trend.
Path Forward: A Bifurcated Outlook
The situation is now bifurcated. In the short term, Strategy’s share price will continue to react primarily to movements in the Bitcoin market. Over the medium to long term, however, the impending index decision and the evolving regulatory framework will be the dominant drivers.
The substantial decline since the start of the year and the wide gap from previous highs perfectly reflect this combination of crypto market fluctuations and structural index risk. All eyes are now on MSCI’s forthcoming decision, which will serve as a definitive catalyst, either relieving significant valuation pressure or confirming the billion-dollar outflows analysts fear.
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