The digital asset treasury firm could face “significant pressure” if stock index MSCI decides to exclude the company in January, according to analysts who spoke to Cointelegraph.
MSCI Index announced in October that it was consulting with the investment community on whether to exclude Bitcoin (BTC) and other digital asset treasury companies (DATs) whose balance sheets contain more than 50% crypto assets.
According to MSCI, among the feedback is that DAT “may exhibit characteristics similar to investment funds that are not currently eligible for inclusion in the index.”
Charlie Sherry, head of finance at Australian crypto exchange BTC Markets, told Cointelegraph that the odds for MSCI to remove DAT are “absolutely favorable,” adding that the index would “only bring such a change into the discussion if it is already leaning in that direction.”
The consultation will run until December 31, with the conclusions to be published on January 15 next year and the resulting changes expected to come into force in February.
Comments are also being sought on whether additional parameters should be considered, such as whether a company defines itself as a DAT or is raising capital primarily to accumulate cryptocurrencies.
Sharry said that if MSCI decides to exclude DAT, index-tracking funds would have to be sold, which alone would put significant pressure on affected stocks.
The preliminary list features 38 crypto companies on MSCI’s radar, including Michael Saylors Strategy, Sharplink Gaming, crypto miner Riot Platforms, Marathon Digital Holdings, and more.
“If a significant portion of the value is derived from balance sheet assets rather than the underlying business, MSCI will treat it as outside the scope of traditional equity benchmarks,” Sherry said. “This is a risk management decision aimed at aligning the index with predictable business fundamentals.”
“This also signals a change in tone from last year, when crypto-heavy corporate strategies were hailed as innovations in capital markets. Now, major index providers are tightening their definitions, indicating the market is moving away from the adopt-all phase and returning to more conservative filters.”
A note Wednesday by JPMorgan analysts warned that the strategy could be cut by $2.8 billion.
If MSCI moves forward, about $9 billion of the estimated $56 billion market capitalization would be held in passive funds that track the index, Bloomberg reported.
It is unclear whether other indices will follow suit.
Shelley said it was “difficult to tell at this stage” whether MSCI’s decision would affect other index providers.
“Index providers often monitor each other’s movements, but they don’t always move in lockstep. S&P’s treatment of MicroStrategy shows there is precedent for a more stringent view, but each provider has its own methodology and customer base to consider.”
Related: Strategy strengthens Bitcoin purchases, executes purchases of 8,178 BTC
“While MSCI’s changes could pave the way for other companies to review their own rules, a knock-on effect is not guaranteed.”
The strategy remains on track to be included in the S&P 500 index, according to cryptocurrency market intelligence firm 10X Research, which also predicted in October that there was a 70% chance the strategy would be added to the index by the end of the year.
Clear rules are good for cryptocurrencies
Meanwhile, Sherry also said that clearer rules on business classification would ultimately help the sector.
“Once companies understand exactly how Treasury’s decisions will be treated, it removes uncertainty for both issuers and investors,” he added.
“A clearly defined framework tends to strengthen long-term institutional confidence, even if the short-term implications are unpleasant for stocks built around Bitcoin holdings.”
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