Strategy Saved, Loop Broken: How MSCI’s Decision Reshapes the Bitcoin Treasury Trade
The specter of a massive, forced sell-off in crypto-linked equities has been averted, at least for now. However, this reprieve comes with a structural catch that fundamentally alters the economics of the “Bitcoin Treasury” trade. On January 6th, MSCI Inc., a dominant benchmark provider for global equity and ETF markets, announced it will retain “Digital Asset Treasury Companies” (DATCOs) – firms like Strategy (formerly MicroStrategy) – in its global indices until the February 2026 review. This decision spares them from immediate expulsion, but simultaneously introduces a significant change that dismantles a key mechanism driving their stock performance. This article dives deep into the implications of MSCI’s decision, quantifying the liquidity gap, and analyzing the emerging competitive landscape for Bitcoin exposure.
MSCI’s Reprieve: A Temporary Stay of Execution
MSCI stated: “For the time being, the current index treatment of DATCOs identified in the preliminary list published by MSCI of companies whose digital asset holdings represent 50% or more of their total assets will remain unchanged.” Following the news, Michael Saylor, Strategy's Executive Chairman, hailed the decision as a victory. However, the relief is tempered by a crucial caveat: MSCI has implemented a technical freeze on share counts for these entities.
Specifically, MSCI explained: “MSCI will not implement increases to the Number of Shares (NOS), Foreign Inclusion Factor (FIF) or Domestic Inclusion Factor (DIF) for these securities. MSCI will defer any additions or size-segment migrations for all securities included in the preliminary list.” This effectively severs the link between new equity issuance and automatic passive buying, a cornerstone of the previous investment thesis.
The End of the Mechanical Bid: A Broken Loop
The immediate market reaction, a surge of over 6% in Strategy’s stock, reflected relief that a catastrophic liquidity event was off the table. JPMorgan previously suggested that full exclusion could have triggered between $3 billion and $9 billion in passive selling of MSTR. However, removing the threat of exclusion masks a new reality: the automatic demand lever for the stocks is gone.
Historically, when Strategy issued new shares to fund Bitcoin acquisitions, the index provider would eventually update the share count. This triggered passive funds tracking the index to buy a pro rata portion of the new issuance to minimize tracking error, creating a guaranteed, price-insensitive source of demand that absorbed dilution. Under the new “freeze” policy, this loop is broken. Even significant expansion of the float to raise capital will be effectively ignored by MSCI for index calculation purposes.
A Return to Fundamentals
Market analysts emphasize that this shift forces a return to fundamentals. Without the backstop of benchmark-tracking demand, Strategy and its peers must now rely on active managers, hedge funds, and retail investors to absorb new supply. This represents a significant challenge, particularly for companies aggressively accumulating Bitcoin through equity issuance.
Quantifying the Liquidity Gap: The Lost Bid
To understand the magnitude of this shift, market researchers are modeling the “lost bid” issuers must now navigate. Bull Theory, a crypto research firm, quantified this liquidity gap in a note to clients. They posited a scenario involving a treasury company with 200 million outstanding shares, where roughly 10% are held by passive index trackers.
In the Bull Theory model, issuing 20 million new shares would have previously mandated passive funds to purchase 2 million of those shares. At a theoretical price of $300 per share, that represents $600 million of automatic, price-insensitive buying pressure. Under MSCI’s new freeze, that $600 million bid vanishes.
As Bull Theory stated: “Strategy now must find private buyers, offer discounts, or raise less money.” This means the forced demand from index funds has been eliminated, presenting a significant hurdle for Strategy, which issued over $15 billion in new shares throughout 2025 to aggressively accumulate Bitcoin.
The “Infinite Money Glitch” Evaporates
The arbitrage trade allowing firms to print equity for crypto is effectively dead, leaving their substantial Bitcoin holdings structurally exposed. If Strategy attempts to replicate its 2025 issuance scale in 2026, it will do so in a market devoid of passive support. Without that structural bid, the risk of a price correction during dilution events increases significantly.
ETFs Emerge as Silent Winners
MSCI's decision to cap these companies, rather than expel them, has also altered the competitive dynamics in asset management. US spot Bitcoin ETFs have matured as an asset class, attracting significant institutional interest. Notably, Morgan Stanley, MSCI’s former parent company, has filed for its own Spot Bitcoin ETF.
Strategy now competes with these fee-bearing Bitcoin ETFs, offering investors a way to gain passive Bitcoin exposure through an operating company structure. By freezing the index weighting of DATCOs, the new rule degrades their ability to efficiently scale via equity markets. If Strategy’s ability to raise cheap capital is curtailed, large allocators may rotate capital out of the corporate equity and into Spot ETFs, which do not carry the operational risks of a company or the premium-to-NAV volatility.
This flow of funds would directly benefit issuers of spot ETFs, including major Wall Street banks, capturing fees previously reflected in equity premiums. MSCI’s decision may have inadvertently, or intentionally, leveled the playing field in favor of traditional asset management products.
Implications for Bitcoin and the Broader Market
The implications of this shift extend beyond Strategy and other DATCOs. The reduced ability of these companies to easily raise capital could slow down their Bitcoin accumulation strategies. This, in turn, could impact the overall demand for Bitcoin, particularly if these companies were significant buyers. However, the increased competition from ETFs could also drive innovation and lower fees for Bitcoin exposure, ultimately benefiting the broader market.
The Rise of Spot ETFs and Institutional Adoption
The growing popularity of spot Bitcoin ETFs signals a maturing market and increasing institutional acceptance. These ETFs offer a regulated and accessible way for investors to gain exposure to Bitcoin without directly holding the asset. This trend is likely to continue, further solidifying Bitcoin’s position as a legitimate asset class.
Navigating the New Landscape
Investors in Strategy and other DATCOs need to reassess their investment thesis. The previous reliance on the mechanical bid from index tracking is no longer valid. A thorough understanding of the company’s fundamentals, Bitcoin’s price trajectory, and the competitive landscape is crucial for making informed investment decisions.
Conclusion: A Pivotal Moment for the Bitcoin Treasury Trade
MSCI’s decision represents a pivotal moment for the Bitcoin treasury trade. While averting an immediate crisis, it fundamentally alters the economics of the strategy. The “infinite money glitch” has evaporated, forcing companies like Strategy to adapt to a new reality where capital raising is more challenging and reliant on market demand. The rise of spot Bitcoin ETFs further complicates the landscape, offering investors alternative and potentially more efficient ways to gain exposure to the leading cryptocurrency. The future success of these companies will depend on their ability to navigate this evolving environment and demonstrate sustainable growth beyond the benefits of passive index inclusion.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Investing in cryptocurrencies and related equities carries significant risk. Always conduct thorough research and consult with a qualified financial advisor before making any investment decisions.