The MSTR-Bitcoin Nexus: Assessing the Impact of Benchmark Exclusion Risks and Market Valuation Gaps

The interplay between MicroStrategy (MSTR) and Bitcoin has become a defining feature of the digital asset investment landscape. As of Q3 2025, MicroStrategy's Bitcoin holdings-640,808 coins valued at $70.9 billion-represent a cornerstone of its corporate strategy, generating a 26% yield year-to-date and $12.9 billion in unrealized gains. However, the company's reliance on Bitcoin as a core asset raises critical questions about valuation gaps, benchmark exclusion risks, and the sustainability of its arbitrage-driven model.

Bitcoin's Absence from Financial Benchmarks: A Double-Edged Sword

Despite growing institutional adoption, Bitcoin remains excluded from major global financial benchmarks such as MSCI indices. This absence limits its integration into passive investment strategies and institutional portfolios, creating a structural asymmetry for companies like MicroStrategy that have heavily allocated capital to Bitcoin. While firms such as KindlyMD have demonstrated Bitcoin's utility as a reserve asset and strategic investment vehicle, the lack of benchmark inclusion means that MicroStrategy's Bitcoin-backed value proposition remains disconnected from traditional market metrics.

This exclusion carries tangible risks. For instance, MSCI's potential decision to exclude MicroStrategy from its indices by mid-2026 could trigger $2.8 billion in outflows, exacerbating downward pressure on its stock price. Such a scenario would compound existing challenges, including a mNAV (modified net asset value) ratio of 1.04 (or 1.16 after dilution), which signals that direct Bitcoin purchases may soon become more attractive than buying MicroStrategy shares.

Valuation Gaps and Arbitrage Opportunities

MicroStrategy's financials underscore a stark disconnect between its stock price and its Bitcoin-backed net asset value (NAV). As of October 26, 2025, the company's Bitcoin holdings were valued at $70.9 billion, with an average cost of $74,032 per coin. While the firm did not report a formal NAV per share for Q3 2025, its "Bitcoin per share" metric-$41,370-provides a proxy for assessing valuation gaps. If the stock price trades below this threshold, investors could exploit the discount through arbitrage.

However, the mNAV ratio complicates this dynamic. A ratio above 1 indicates that the stock is trading at a premium to its NAV, while a ratio below 1 suggests the opposite. MicroStrategy's current mNAV of 1.04 implies a narrow premium, but the 1.16 post-dilution figure hints at a potential arbitrage window. Investors must weigh these metrics against the company's capital-raising activities, which have raised $19.8 billion year-to-date to acquire more Bitcoin. Such aggressive accumulation could either narrow the valuation gap or widen it, depending on market sentiment and Bitcoin's price trajectory.

Risks and Strategic Vulnerabilities

MicroStrategy's strategy is not without vulnerabilities. The amendment of its common stock issuance terms and a slowdown in Bitcoin purchases have raised concerns about governance and execution risks. Additionally, the rise of artificial intelligence as a capital allocation priority could divert institutional interest from Bitcoin, indirectly affecting MicroStrategy's stock performance.

The company's reliance on Bitcoin's price reaching $150,000 by year-end-central to its projected $24 billion net profit and $80 diluted EPS-introduces further volatility. If Bitcoin underperforms, the valuation gap could widen, and the mNAV ratio could fall below 1, eroding the arbitrage opportunity.

Conclusion: A High-Stakes Bet on Bitcoin's Future

MicroStrategy's Bitcoin-centric model represents a bold bet on the digital asset's long-term value. While its Q3 2025 results-$3.9 billion in revenue and $2.8 billion in net income-demonstrate the strategy's potential, the risks of benchmark exclusion, valuation gaps, and market volatility cannot be ignored. For investors, the key lies in balancing the allure of Bitcoin's growth with the structural challenges of integrating it into traditional financial systems. As the MSTR-Bitcoin nexus evolves, the coming months will test whether this hybrid model can withstand the pressures of a rapidly shifting market.