The firm known as Strategy, once recognized as the pioneering “bitcoin-on-NASDAQ” proxy, is currently confronting a significant structural risk. This is particularly pertinent since Michael Saylor initiated the firm’s transformation into a leveraged Bitcoin holding entity five years ago.

A recent research note from JPMorgan highlights that Strategy is now “at risk of exclusion from major equity indices.” This concern arises as MSCI approaches a critical decision on January 15 regarding the eligibility of companies with substantial digital-asset treasuries for inclusion in traditional stock benchmarks.

MSCI is deliberating a rule that would exclude companies whose digital-asset holdings exceed 50% of their total assets—a classification that places Strategy at a notably precarious position.

With the firm’s market capitalization around $59 billion and nearly $9 billion invested in passive index-tracking vehicles, analysts caution that exclusion could precipitate severe mechanical selling pressure.

The potential outflows could reach $2.8 billion if MSCI excludes Strategy, escalating to as much as $8.8 billion should other index providers follow suit.

Current State of MSTR

This warning coincides with a particularly vulnerable moment for Strategy. Its shares have decreased more significantly than Bitcoin itself in recent months, as the previously elevated premium—reflected in the “mNAV” spread between enterprise value and Bitcoin holdings—has plummeted to just above 1.1, representing the lowest point since the pandemic began.

MSTR has experienced a sharp decline of approximately 40% in value over the last six months, with 11% of this depreciation occurring within the last five trading sessions.

The operational model that fueled Strategy’s ascendance—raising equity, acquiring Bitcoin, leveraging reflexivity, and repeating the cycle—now faces substantive structural challenges, with the stock having fallen over 60% since its high last November.

The company’s perpetual preferred shares have undergone a significant sell-off, reflected in rising yields on its 10.5% notes, which have increased to 11.5%. A recent euro-denominated preferred issuance fell below its discounted offer price within a two-week timeframe.

Strategy’s inclusion in benchmarks such as the Nasdaq 100, MSCI USA, and MSCI World has historically facilitated the integration of Bitcoin into mainstream portfolios. This access to passive ETF and mutual fund flows has sustained Strategy’s liquidity, valuation, and visibility among institutional investors.

Though active managers are not obliged to align with index transformations, JPMorgan has warned that mere removal from such indices could inflict reputational damage, widen funding spreads, and diminish trading activity—thus rendering the stock less appealing to large institutions.

The trajectory of Strategy’s rise, alongside its present vulnerabilities, highlights the profound infiltration of Bitcoin into global finance through indirect mechanisms.

At one juncture, analysts posited that the firm could potentially enter the S&P 500. Contrary to this notion, the digital-asset treasury model now appears increasingly fragile as Bitcoin is down by 30% since its peak in October, and the broader cryptocurrency markets have shed over $1 trillion in value.

Upcoming January 15 Inflection Point for Strategy

JPMorgan posits that Strategy’s pronounced underperformance relative to Bitcoin is currently driven more by fears of potential index exclusion than by any inherent weakness in Bitcoin itself. Should MSCI deliver a negative ruling, the company’s valuation could become closely tethered to the performance of its underlying Bitcoin assets, with its mNAV ratio approaching 1.0.

This change could effectively negate the reflexive premium that has characterized Saylor’s strategy over the past five years.

He envisions increasing Bitcoin holdings by 20–30% annually, thereby leveraging long-term appreciation to create an extensive store of digital collateral.

Building on this foundation, Saylor plans to issue Bitcoin-backed credit at yields significantly exceeding those of traditional fiat systems, potentially in the range of 2–4% above corporate or sovereign debt, thus offering safer, over-collateralized alternatives.

He anticipates that this could revitalize credit markets, equity indexes, and corporate balance sheets while facilitating the creation of new financial products, including higher-yield savings accounts, money market funds, and insurance services denominated in Bitcoin.

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