A proposal regarding the potential exclusion of MicroStrategy (MSTR) from the MSCI index has ignited a clash of ideologies between cryptocurrency supporters and traditional financial institutions, setting the stage for a "crypto vs. Wall Street" showdown.
Recently, index provider MSCI Inc released a consultation document proposing the removal of "digital asset treasury companies" from its global investable market indices. According to MSCI's definition, these companies hold digital assets exceeding 50% of their total assets or identify as digital asset treasuries primarily raising funds to accumulate Bitcoin.
MSCI explicitly questioned whether these companies "exhibit characteristics similar to investment funds," which are typically excluded from equity benchmark indices. This forms the crux of the debate: Are these "digital asset treasury companies" innovative operating entities or investment funds disguised as corporations?
The proposal triggered immediate market reactions. Wall Street giant JPMorgan issued an analysis warning that MSTR's exclusion would create "significant pressure" on its valuation. The bank noted that approximately $9 billion of MSTR's $59 billion market capitalization was held by passive investment vehicles tracking major indices.
JPMorgan estimated that MSCI's action alone could force about $2.8 billion in passive fund selling, with potential total outflows reaching $8.8 billion if other index providers like Russell follow suit. Meanwhile, 107-year-old investment bank TD Cowen predicted MSCI would eventually remove all such "digital asset treasury companies" from its indices.
The crypto community mounted fierce resistance, with some even calling for shorting JPMorgan stock. Critics accused the bank of potential "front-running" – positioning trades before releasing bearish reports to profit from price declines. Crypto advocates argue these companies provide institutional investors restricted from direct crypto exposure with indirect Bitcoin access through equities, which index removal could undermine.
MicroStrategy Executive Chairman Michael Saylor countered that his company isn't a fund, trust, or holding company but an operating business with $500 million in software revenue, using Bitcoin as "productive capital." Meanwhile, MicroStrategy's founder staunchly defended its business model. This controversy extends beyond one company's fate, potentially accelerating institutional Bitcoin exposure rotation from proxy stocks to more clearly regulated spot ETFs.
On the surface, MSCI's proposal resembles routine "index housekeeping." Its October consultation document raised a fundamental question: Do companies holding substantial digital assets "display characteristics akin to investment funds?" This stems from mainstream equity indices typically excluding investment vehicles like ETFs and closed-end funds to ensure constituents represent operating companies in the real economy. MSCI seeks to clarify whether software companies with Bitcoin-dominated balance sheets have crossed into investment vehicle territory.
According to MSCI's timeline, final rules will be announced by January 15, 2026, with implementation planned for February 2026 index reviews. This seemingly technical adjustment could profoundly impact an emerging equity category.
At its core, this event represents a philosophical conflict about defining these new corporate structures. Market views diverge sharply:
Supporters of classifying them as regular stocks argue: - They are legally equities - Most have other businesses beyond crypto holdings (like MSTR's $500M software operations) - They provide compliant crypto exposure for restricted institutions
Opponents counter more sharply: - They're essentially investment funds, traditionally excluded from major indices - "Operating businesses" are window dressing, with prices tracking crypto holdings - Allowing such crypto exposure in equity funds violates investors' expectations for pure stock exposure
MicroStrategy co-founder Michael Saylor vehemently rejects the "fund" label, positioning his company as a "Bitcoin-backed structured finance company" using BTC as productive capital. He maintains index classification won't affect operations.
Regardless of definitions, MSCI's move may accelerate an existing trend: institutional capital rotating from digital asset treasury (DAT) stocks to spot Bitcoin ETFs. DLA Piper reports over 200 U.S. public companies adopted DAT strategies by September 2025, holding about $115B in crypto. While providing convenient exposure, these carry structural weaknesses like forced asset sales when stock prices fall below crypto NAV.
Meanwhile, spot Bitcoin ETFs surpassed $100B AUM within a year of launch, offering purer exposure without complex balance sheet issues. MSCI's proposal represents a "clear liquidity negative" for proxy stocks – index funds selling MSTR would buy replacement stocks, not Bitcoin ETFs. While not directly causing BTC sales, secondary effects could emerge as pressured DAT companies face reduced Bitcoin purchasing capacity or forced liquidations.
Beyond MicroStrategy, CryptoSlate data shows crypto miners like Riot Platforms and Marathon Digital on MSCI's watchlist, creating potential "long tail" liquidity risks. Ultimately, this controversy forces a market choice: Should Bitcoin exposure reside in equity benchmarks or specialized crypto investment products?