Bitcoin Updates: Conventional Indexes' Dismissal Challenges MSTR's Valuation Approach Based on Bitcoin

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Bitcoin Updates: Conventional Indexes' Dismissal Challenges MSTR's Valuation Approach Based on Bitcoin

Bitget-RWA2025/11/20 22:28

By:Bitget-RWA

- JPMorgan warns MSTR could lose $2.8B if MSCI excludes it from key indices, risking further $8.8B losses if others follow. - MSTR's index inclusion funneled $9B into its $59B market cap; exclusion would trigger forced selling and liquidity erosion. - S&P 500 rejected MSTR as a "software" company, while MSCI's 50% digital asset rule directly targets its 3% bitcoin holdings. - Saylor's leveraged bitcoin strategy faces broken reflexivity as shares trade at discounts, eroding its premium valuation model. - MS

JPMorgan has delivered a serious alert regarding Michael Saylor's

Strategy

Inc. (MSTR)

which could see as much as $2.8 billion withdrawn by passive investors

if index provider

MSCI

removes the company from major equity indices during its January 15 review. The bank further projects that losses could reach $8.8 billion should other index providers follow suit, intensifying the structural risks for the bitcoin-centric company as its shares trade at levels last seen during the pandemic.

The report points out that MSTR’s presence in leading indices such as the Nasdaq 100, MSCI USA, and MSCI World has indirectly brought

bitcoin

exposure into both institutional and retail investment portfolios.

As stated by JPMorgan’s analysts

led by Nikolaos Panigirtzoglou, passive funds tracking these indices currently hold around $9 billion of MSTR’s $59 billion market cap. Being dropped from these indices would prompt index-tracking funds to sell, reducing liquidity and making it harder for the company to raise new capital.

Saylor’s approach of aggressively acquiring bitcoin with leverage—now totaling 649,870 BTC worth $48.37 billion—has left

MSTR

increasingly vulnerable to market swings. The company’s enterprise value has fallen to just 1.1 times its bitcoin net asset value (NAV), the lowest since the pandemic, as its stock lags behind the cryptocurrency it is linked to.

JPMorgan links this underperformance

to concerns about possible index exclusion, rather than movements in bitcoin’s price, and notes that while active managers aren’t required to follow index changes, ignoring them could harm their reputations.

Bitcoin Updates: Conventional Indexes' Dismissal Challenges MSTR's Valuation Approach Based on Bitcoin image 0

The S&P 500’s recent decision not to add MSTR highlights ongoing doubts about its business model. The committee categorized it as a software company under GICS, despite its shift to a bitcoin treasury strategy. S&P Dow Jones Indices has not yet changed its classification, making future inclusion more difficult. At the same time,

MSCI’s suggested rule to remove

companies with digital assets making up more than 50% of their total assets directly targets MSTR, which controls over 3% of all bitcoin in circulation.

Saylor remains optimistic, imagining a $1 trillion bitcoin balance sheet as the foundation for a new financial system built on Bitcoin-backed lending and yield products. However,

JPMorgan

analysts warn that the company’s strategy of raising equity to buy bitcoin at a premium is no longer working. Since November 2024, the stock has dropped 60%, wiping out its previous premium, and preferred shares now trade at a discount, signaling investor skepticism.

With MSCI’s decision approaching, MSTR’s future depends on whether traditional markets will accept its crypto-focused approach. A negative outcome could force the company’s valuation to reflect only its bitcoin holdings, removing the growth story that once drove its rapid ascent. For now, the market is watching closely as Saylor’s bitcoin gamble faces its most critical challenge yet.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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