Bitcoin News Today: Strategy's Bitcoin-Centric Model Faces Existential Test as Index Delisting Looms

JPMorgan Chase has issued a stark warning that Strategy Inc. (MSTR), the Bitcoin-focused company led by Michael Saylor, could face massive outflows if it is excluded from major equity indices like MSCI USA and Nasdaq 100. The bank estimates that removal from MSCI alone could trigger $2.8 billion in passive outflows, with an additional $8.8 billion at risk if other index providers follow suit. This potential delisting, pending a January 15 decision by MSCI, stems from the index provider's proposed rule to exclude companies where digital assets exceed 50% of total assets - a category that includes Strategy, which holds over 638,000 BTC worth approximately $72 billion.

The warning comes as Strategy's stock has plummeted more than 60% since November 2024, eroding the premium that once made it a darling of crypto investors. Its market value now hovers just 1.1 times its Bitcoin net asset value (NAV), the lowest since the pandemic. JPMorgan analysts, led by Nikolaos Panigirtzoglou, argue that the recent underperformance is driven not solely by Bitcoin's price decline but by fears of index exclusion. "This would be viewed negatively by market participants, raising concerns about Strategy's ability to raise equity and debt," the report states.

Strategy's inclusion in benchmarks like the Nasdaq 100 and MSCI World has indirectly funneled Bitcoin exposure into institutional and retail portfolios. However, MSCI's consultation process, which ends in December, has revealed growing skepticism about whether digital-asset treasury companies should be classified as operating businesses. The index provider noted that such entities resemble investment funds, which are ineligible for inclusion.

For Strategy, the stakes are existential. Its business model relies on raising equity to buy Bitcoin, leveraging appreciation to fuel further purchases. But with preferred shares trading at discounts and yields on its debt rising, the company's ability to fund new acquisitions is under pressure. Saylor, who envisions a $1 trillion Bitcoin balance sheet as the foundation for a new financial system, has defended the strategy, but JPMorgan analysts caution that a negative ruling could tether the company's valuation entirely to its Bitcoin holdings, eliminating the "reflexive premium" that fueled its growth.

The S&P 500 also rejected Strategy for inclusion earlier this year, citing its classification as a software company under the GICS system - a categorization that predates its pivot to Bitcoin. S&P Dow Jones Indices has yet to reclassify the firm, complicating future inclusion efforts. Meanwhile, MSCI's proposed changes could force a broader reevaluation of crypto treasury companies, with implications for liquidity, funding costs, and investor appetite.

As the January 15 deadline approaches, Strategy's future hinges on whether traditional markets accept its crypto-centric model. A delisting could not only trigger billions in outflows but also signal a shift in how institutional investors view digital-asset-heavy balance sheets. For now, the market watches closely as Saylor's Bitcoin gamble faces its most critical test yet.