MicroStrategy’s Exclusion from S&P 500 and Implications for Crypto-Backed Equities

In September 2025, MicroStrategy (MSTR) was excluded from the S&P 500 rebalancing despite meeting formal inclusion criteria such as market capitalization, liquidity, and profitability [1]. This decision, shrouded in the secrecy of the S&P 500 committee’s discretionary process, underscores a critical tension in modern investing: the clash between innovation and stability. For crypto-backed equities like MicroStrategy, the exclusion raises questions about how traditional indices evaluate volatility and earnings consistency in an era of digital assets.

The S&P 500’s Double Standard: Formal Rules vs. Discretion

The S&P 500’s inclusion criteria are ostensibly objective, requiring companies to meet thresholds for market cap, liquidity, and profitability. However, the committee’s discretion allows it to prioritize “conventional” business models over disruptive ones. In MicroStrategy’s case, its Bitcoin-centric treasury—where unrealized gains and losses directly impact earnings—was deemed too volatile for the index [2]. By contrast, companies like Robinhood and AppLovin, which joined the index in 2025, were praised for diversified revenue streams and predictable growth metrics [3].

Robinhood, for instance, reported a 65% year-on-year increase in transaction-based revenue and a 98% surge in crypto trading revenue in Q2 2025 [4]. AppLovin, meanwhile, posted a 40% revenue jump and a 33.55% net profit margin [5]. These metrics align with the S&P 500’s emphasis on earnings stability, even if their business models are still nascent compared to legacy industries.

Volatility as a Liability: The Bitcoin Factor

MicroStrategy’s exclusion highlights the S&P 500’s aversion to asset classes with extreme price swings. While the company’s stock price surged in 2024 due to Bitcoin’s rally, its earnings are inextricably tied to the cryptocurrency’s volatility. For example, a 20% drop in Bitcoin’s price could erase a significant portion of MicroStrategy’s reported earnings, creating instability that contradicts the index’s goal of representing “blue-chip” stability [6].

This risk is amplified by the broader macroeconomic context. In 2025, the S&P 500 itself experienced a 19% correction followed by a 19.5% rebound within a month, illustrating how even traditional indices are not immune to volatility [7]. Yet, the committee’s preference for companies with diversified revenue models—like Robinhood’s mix of trading commissions and crypto services—suggests a desire to mitigate single-point risks, even if those risks are tied to high-growth assets.

Implications for Crypto-Backed Equities

MicroStrategy’s exclusion sends a clear signal to investors: traditional indices remain skeptical of crypto-backed equities. For companies relying on digital assets for value creation, the S&P 500’s criteria act as a barrier to mainstream adoption. This exclusion limits automatic passive flows from index funds, which typically buy shares of newly added companies. As a result, MicroStrategy’s institutional exposure to Bitcoin remains constrained, delaying broader acceptance of crypto as a corporate treasury asset [8].

However, this decision may also accelerate the development of alternative indices. Firms like Nasdaq and Cboe are already exploring crypto-linked benchmarks, which could offer a more inclusive framework for companies like MicroStrategy [9]. For now, though, the S&P 500’s gatekeeping role reinforces the idea that stability—over innovation—remains the gold standard for institutional investors.

The Secret Committee Problem

The opacity of the S&P 500 committee’s process further complicates the narrative. Bloomberg ETF strategist Eric Balchunas has called the index an “active fund run by a secret committee,” highlighting how subjective judgments can override objective metrics [10]. In MicroStrategy’s case, the committee’s reluctance to embrace Bitcoin-centric models—even as the company outperformed the index—exposes a bias toward conventional thinking. This discretion raises concerns about fairness, particularly as crypto’s role in global finance grows.

Conclusion: A Fork in the Road for Crypto-Backed Equities

MicroStrategy’s exclusion from the S&P 500 is not just a corporate setback—it’s a case study in the challenges facing crypto-backed equities. While volatility and earnings instability are valid concerns, the committee’s rigid adherence to traditional metrics risks stifling innovation. For investors, the lesson is clear: the path to mainstream adoption for crypto-linked companies will require either a shift in index criteria or the creation of new benchmarks that reflect the realities of a digital-first economy.

Until then, the S&P 500 will remain a mirror of the status quo, favoring stability over disruption—even when the disruptors are outperforming the market.

Source:
[1] Robinhood Joins the S&P 500 — Why Strategy (MSTR) [https://www.ccn.com/education/crypto/mstr-watch-strategy-missed-sp-500-robinhood-got-in-explained/]
[2] MicroStrategy Excluded from S&P 500 Rebalancing [https://coincentral.com/microstrategy-left-out-of-latest-sp-500-rebalancing-as-new-stocks-join/]
[3] Why MicroStrategy and Robinhood Missed Out on S&P ... [https://www.okx.com/en-us/learn/microstrategy-robinhood-s-and-p-500]
[4] Earnings call transcript: MicroStrategy's Q2 2025 beats expectations ... [https://www.investing.com/news/transcripts/earnings-call-transcript-microstrategys-q2-2025-beats-expectations-stock-rises-93CH-4164706]
[5] NASDAQ:APP Financials | Applovin Corp [https://www.investing.com/equities/applovin-financial-summary]
[6] Strategy's Exclusion From The S&P 500 in September 2025 [https://www.tekedia.com/strategys-exclusion-from-the-sp-500-in-september-2025-has-several-implications/?srsltid=AfmBOopc1xDSL-ONh-4jKtvznCVdMtJFsodcv-eVjzpmmKKdha56eJBt]
[7] Will the market stabilize? 6 factors to watch - Jennifer Goff [https://www.ameripriseadvisors.com/jennifer.e.goff/insights/restoring-market-stability/]
[8] Market volatility predictions for 2025 [https://www.im.natixis.com/en-us/insights/macro-views/2024/market-volatility-predictions]
[9] iShares Core S&P 500 ETF (IVV) News [https://mlq.ai/stocks/IVV/news/]
[10] Strategy (MSTR) Stock: Snubbed by S&P 500 as “Secret Committee” Blamed for Exclusion [https://coincentral.com/strategy-mstr-stock-snubbed-by-sp-500-as-secret-committee-blamed-for-exclusion/]