JPMorgan says Saylor strategy could see billions of dollars in outflows if MSCI excludes MSTR

Strategy, the original “Bitcoin on Nasdaq” agency, now faces its most significant structural risks since Michael Saylor began transforming the company into a leveraged BTC holding vehicle five years ago.

A new research note from JPMorgan warns that the strategy is “at risk of being removed from major stock indexes” as MSCI approaches a key decision on January 15 on whether companies with large holdings of digital assets belong in traditional equity benchmarks.

MSCI is considering rules that would exclude companies whose digital asset holdings exceed 50% of their total assets, a category in which the strategy sector is the most extreme.

With the company’s market capitalization hovering around $59 billion and nearly $9 billion held in passive index-tracking vehicles, analysts say any exclusion could create severe mechanical selling pressure.

If MSCI removes the strategy, the outflow could reach $2.8 billion, and if other index providers follow suit, the outflow could reach $8.8 billion, analysts said.

Current status of MSTR

Warnings are issued at moments of danger. Strategy shares have fallen more than Bitcoin itself in recent months, as the company’s once-high premium (mNAV, the spread between enterprise value and Bitcoin holdings) has collapsed to just above 1.1, the lowest since the pandemic.

MSTR’s value has fallen by approximately 40% in the past six months, and by 11% in the past five business days.

The strategy upside-driven model (raise equity, buy Bitcoin, benefit from reflexivity, repeat) is currently facing structural headwinds. The stock is down more than 60% from its high in November of last year.

The company’s perpetual preferred stock has fallen sharply, and the yield on its 10.5% bonds has risen to 11.5%. A recent euro-denominated priority issue fell below its discounted offering price within two weeks.

The strategy’s inclusion in the Nasdaq 100, MSCI USA, MSCI World, and other benchmarks has quietly funneled Bitcoin trading into mainstream portfolios for years. The flow of passive ETFs and mutual funds has helped maintain Strategic’s liquidity, reputation, and recognition from institutional investors.

However, JPMorgan said something new emerged from MSCI’s October talks. Market participants are increasingly viewing digital asset treasury companies as more like investment funds than business operations. Investment funds are not eligible for inclusion in the index. This is the heart of Strategy’s problem.

MSCI said it was not “speculating on future index changes” but was evaluating whether balance sheets centered on digital assets should remain within the range of equity benchmarks.

While active managers don’t need to mimic index movements, JPMorgan warns that a suspension alone could cause reputational damage, widen capital spreads, dilute trading activity and make stocks less attractive to large institutions.

The rise of the strategy and its current risks highlight how deeply Bitcoin has penetrated global finance through indirect channels.

Analysts at one point speculated that the company would enter the S&P 500. If anything, the financial model for digital assets looks increasingly fragile, as Bitcoin has fallen 30% from its October high and the value of the crypto market has fallen by more than $1 trillion.

Strategy turning point is January 15th

JPMorgan believes that the strategy’s dramatic underperformance versus BTC is now primarily driven by index expulsion concerns rather than Bitcoin weakness. If MSCI issues a negative ruling, the company’s valuation could be tied almost perfectly to the underlying asset, BTC, and its mNAV ratio could approach 1.0.

That would eliminate the reflexive premium that drove Saylor’s strategy over the past five years.

In an interview earlier this year bitcoin magazine Earlier this year, Saylor outlined an ambitious vision to build a multitrillion-dollar Bitcoin balance sheet, using it as the foundation for reshaping global finance.

He envisions amassing $1 trillion in Bitcoin and leveraging its long-term value appreciation to build a large stockpile of digital collateral, growing by 20-30% each year.

Saylor plans to build on this by issuing Bitcoin-backed credits at significantly higher yields than traditional fiat regimes (potentially 2% to 4% higher than corporate and sovereign bonds), providing a safer alternative to overcollateralization.

He predicts this will boost credit markets, stock indexes and corporate balance sheets, while potentially creating new financial products such as high-yield savings accounts, money market funds and Bitcoin-denominated insurance services.