The Impending MSCI Index Exclusion and Its Impact on Crypto-Heavy Firms

The evolving relationship between traditional financial indices and the crypto sector has reached a critical juncture. MSCI's proposed exclusion of digital asset treasury firms (DATs) from its global equity benchmarks-specifically those with 50% or more of their total assets in cryptocurrencies-has ignited a fierce debate about the future of crypto-related equities. This decision, if finalized, could reshape the investment landscape for firms like Strategy, Riot Platforms, and Marathon Digital, while also testing the resilience of the crypto corporate model itself.

MSCI's Rationale and the 50% Threshold

MSCI's proposal hinges on the argument that DATs with heavy crypto holdings exhibit characteristics akin to investment funds, which are already excluded from its indices. The firm contends that such companies lack the operational diversity typically associated with index-eligible equities. However, critics argue that this 50% threshold is arbitrary and ill-suited to the volatile nature of crypto assets. For instance, Bitcoin's price swings could push firms in and out of index eligibility within weeks, creating unnecessary market churn. The consultation period for this proposal, initially set for October 2025, has been extended to December 31, 2025, with a final decision expected by January 15, 2026 according to MSCI's announcement.

Industry Pushback and Strategic Arguments

The crypto sector has mounted a robust defense against MSCI's proposal. Strategy, a leading DAT, has argued that it operates as a corporate entity generating returns through Bitcoin-backed credit instruments and treasury management, not as a passive investment fund according to its public statement. The firm has also criticized the 50% threshold as a blunt tool that fails to account for the operational complexity of DATs, contrasting it with industries like oil or real estate, which often hold significant asset concentrations without facing similar scrutiny as noted by MEXC analysts.

Similarly, Vivek Ramaswamy's Strive Asset Management has warned that index providers should remain neutral and avoid taking policy positions according to Forbes reporting. Meanwhile, Strategy has raised broader concerns about national security, asserting that excluding DATs from major indices could undermine U.S. competitiveness in a rapidly evolving sector as reported by Yahoo Finance. These arguments highlight the tension between regulatory caution and the need to foster innovation in crypto-related businesses.

Investment Risks: Short-Term Volatility and Passive Fund Outflows

The immediate risk for affected firms is significant. JPMorgan analysts estimate that the exclusion of DATs from MSCI indices could trigger up to $2.8 billion in passive fund outflows for Strategy alone according to Yahoo Finance. This is compounded by the fact that Strategy's market net asset value (mNAV)-a metric that once traded well above its Bitcoin holdings-has now fallen to just 1.1x, indicating that its stock is trading marginally above the value of its crypto assets as reported by the same source. Such a dynamic raises questions about the sustainability of the DAT business model, particularly if index inclusion is removed as a tailwind for liquidity and valuation.

Strategic Opportunities: Adaptation and Diversification

While the exclusion poses risks, it also creates opportunities for strategic adaptation. Companies like Strategy are already pivoting toward generating revenue through Bitcoin-backed credit instruments and corporate treasury management as reported by MEXC. This shift could reduce reliance on index inclusion and diversify income streams, potentially insulating firms from future regulatory headwinds. Additionally, the backlash against MSCI's proposal has spurred industry-wide efforts to engage with index providers and regulators, advocating for a more nuanced approach to crypto-related equities according to CoinDesk reporting.

Market Implications and the Path Forward

The extended consultation period offers a window for the crypto sector to refine its arguments and demonstrate the viability of DATs as operating companies. If MSCI proceeds with the exclusion, the February 2026 Index Review will mark a pivotal moment for affected firms. However, the outcome remains uncertain, as the industry's pushback-coupled with the potential economic and national security risks highlighted by critics-could yet sway the decision.

For investors, the key takeaway is the need for strategic flexibility. While the exclusion of DATs from major indices may introduce short-term volatility, it also accelerates the sector's evolution toward diversified business models. Those who position themselves to support this transition-whether through equity stakes in adaptive firms or exposure to Bitcoin-backed instruments-may find themselves well-placed to capitalize on the next phase of the crypto corporate landscape.