JPMorgan warned in a research report that if Strategy is ultimately removed, it could trigger a forced sell-off of up to $2.8 billion.

Written by: Zhao Ying

Source: Wall Street Watch

Index provider giant MSCI has proposed to exclude companies with a significant amount of cryptocurrency assets from its global investable market index, a potential change that is provoking strong opposition in the crypto community. Strategy, which holds a large amount of Bitcoin, is at the forefront, and JPMorgan, which released the related research report, has unexpectedly become a target of resistance.

Recently, MSCI issued a statement proposing to exclude "digital asset treasury companies" that hold more than 50% of their balance sheet in cryptocurrencies from its index, with the policy change expected to take effect in January 2026. JPMorgan shared this news in a research report, which was met with fierce criticism from the Bitcoin community, with several crypto advocates calling for a "boycott" of the financial services giant.

JPMorgan analyst Nikolaos Panigirtzoglou's team warned that if Strategy is ultimately removed, its valuation will face "considerable pressure." Analysts estimate that out of Strategy's approximately $59 billion market capitalization, about $2.8 billion is held by funds that explicitly track the MSCI index. Once the removal decision takes effect, it could trigger a forced sell-off of up to $2.8 billion.

This index adjustment could trigger a chain reaction. Excluded crypto treasury companies will lose inflows from passive funds, and related funds and asset management companies will be forced to automatically sell these companies' stocks, potentially causing a negative impact on the cryptocurrency market.

A Wave of Boycotts in the Crypto Community

JPMorgan has become the focus of anger in the crypto community due to its research report on the MSCI index adjustment.

Real estate investor and Bitcoin advocate Grant Cardone stated on social media: "I just withdrew $20 million from JPMorgan and am suing them for credit card misconduct." Bitcoin advocate Max Keiser called out: "Take down JPMorgan, buy Strategy and Bitcoin."

This online boycott movement quickly escalated, highlighting the cryptocurrency community's sensitive nerve regarding interventions by traditional financial institutions. Although JPMorgan is merely relaying MSCI's policy proposal, it has borne the brunt of the collective boycott from the crypto community as the messenger.

Response from Strategy's Founder to Policy Change

Strategy founder Michael Saylor broke his silence last Friday to respond to MSCI's proposed policy changes.

He emphasized: "Strategy is not a fund, not a trust, and not a holding company. Funds and trusts passively hold assets, while holding companies own investments, and we create, build, issue, and operate."

Saylor defined Strategy as a "Bitcoin-backed structured financial company," attempting to distinguish it from entities that passively hold assets. Strategy is set to enter the Nasdaq 100 index in December 2024, which includes the 100 largest companies by market capitalization on the tech exchange. Joining this index allows Strategy to benefit from passive inflows from funds and investors holding the Nasdaq 100.

Market Impact of Index Exclusion

According to MSCI's proposed new standards, any treasury company with a cryptocurrency share of 50% or more on its balance sheet will lose index eligibility. These companies will face two choices: either reduce their cryptocurrency holdings below the threshold to retain index eligibility or lose passive inflows from the market index.

JPMorgan analysts pointed out that this speculation may be one of the factors putting pressure on Strategy's stock price recently. Of the company's approximately $59 billion market capitalization, about $9 billion is held by investment vehicles tracking various indices.

Analysts warned that if crypto treasury companies affected by the MSCI proposal suddenly sell off, it could force digital asset prices to drop. Passive mutual funds and ETFs tracking the MSCI index will be compelled to sell related stocks after the index adjustment takes effect, and this forced selling pressure will have a dual impact on company valuations and the cryptocurrency market.

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