Two Bitcoin Treasuries Dropped by MSCI: Can the Financing Flywheel Still Turn Once Indexes Stop Buying?

By Jae

On November 12, a single announcement from global index compiler MSCI finally brought down the shoe that had been hanging over the crypto market for nearly a month.

MSCI formally confirmed that it will remove the two leading Bitcoin DATs (digital asset treasuries) Strategy (MSTR) and Metaplanet from its index lists, while Ethereum DAT SharpLink Gaming has been placed on the watch list. All adjustments take effect after the close on November 30.

Wall Street is now conducting a kind of identity test: when a listed company's balance sheet is dominated by asset investments and its main business has become a decoration, it turns into an investment fund packaged as a stock.

MSCI's Index Rule Overhaul: The Crypto Treasury Delisting Had Been Long Telegraphed

MSCI's move to kick Strategy and Metaplanet off its index lists was in fact long in the making.

In October last year, MSCI floated targeted provisions: listed entities whose digital assets exceeded 50% of total assets would be excluded from its indexes, and weight and share-count increases for the companies concerned would be suspended. The news drew collective opposition from the crypto industry and some institutional investors, and early this year MSCI withdrew that crypto-specific rule.

That, however, was not the end of it. In August this year, MSCI launched a market consultation on general rules covering all "non-operating companies," finalized on October 15. The framework follows a single core standard: whether a company's value comes from the real operation of products and services, or from fair-value swings in asset prices.

The framework is built from an "operating assets screen" and a "five-dimension financial ratio test." If a company fails the operating assets test and fails four or more of the five financial metrics, it is judged a "non-operating vehicle."

To keep its indexes stable, MSCI also set up a buffer mechanism: newly applying constituents are rejected if they miss the bar in a single reporting period; companies already in the index that miss the bar in a single period only enter the watch list, and are removed only after failing for two consecutive full fiscal years.

Strategy and Metaplanet stepped on every red line.

As of November 8, Strategy held 850,364 bitcoin, with a cumulative purchase cost of about $64.16 billion. In stark contrast stands its old line of business, enterprise software, whose third-quarter (Q3) 2026 revenue was just $125.4 million. The software business still exists, but the key variable determining the company's asset size, earnings volatility and share price performance became bitcoin long ago. In mid-October, Strategy Chairman Michael Saylor said MSCI's removal of Strategy from its indexes does not matter, as the amount of money they control is fairly small. He criticized MSCI for counting oil, natural gas, land and machinery as capital while not counting bitcoin, calling it a biased value judgment imposed on digital assets.

Japan's Metaplanet took a similar path. The small-cap company, which originally ran hotel and entertainment businesses, hoarded 44,000 bitcoin through continuous fundraising after an aggressive pivot, while its traditional core business was pushed to the margins. Responding to its removal from the MSCI Japan Small Cap index, CEO Simon Gerovich said the index adjustment will not disrupt normal operations or the company's bitcoin strategy, and that management will keep advancing capital allocation to serve its long-term bitcoin-holding goal.

SharpLink Gaming, run by Ethereum co-founder Joseph Lubin, escaped for now. Its pivot to an Ethereum treasury is still recent, and within MSCI's lookback window only its latest reporting period failed the standards; thanks to the two-year tolerance period for existing constituents, it entered the watch list. But if the next earnings report still cannot demonstrate that its main business generates cash, following in the footsteps of Strategy and Metaplanet is only a matter of time.

Notably, this round of removals also included British uranium investment company Yellow Cake. That means MSCI is not simply targeting DATs, but drawing a line between "operating companies" and "asset investment vehicles."

The $2.8 Billion Sell Pressure Is an Old Estimate; the Financing Flywheel May Face Long-Term Strain

Once the news broke, talk of "$2.8 billion in passive sell pressure and $8.8 billion in outflows" spread quickly, becoming a set of numbers that fueled market anxiety.

Both figures first came from a JPMorgan research report published last November. By its calculation at the time, MSCI's removal of Strategy could trigger about $2.8 billion in passive selling; if other index providers follow suit, outflows could reach as much as $8.8 billion.

A year on, MSTR's share price, share count and the size of index-tracking funds' holdings have all changed enormously, so forcing old numbers onto the current situation is bound to distort the picture. What really needs clarifying is how many shares actually have to change hands now, and the market's capacity to absorb them.

According to official data Strategy disclosed at the end of August this year, passive funds held a total of 13 million shares. Using MSTR's November 11 closing price of $122.35, roughly 402 million shares outstanding, and average volume of 18.49 million shares over the past 30 trading days, passive selling would amount to $1.59 billion, about 3.2% of shares outstanding, equivalent to 0.7 days of average daily volume.

Unlike most small- and mid-cap stocks that sink into a liquidity drought after being removed, MSTR is highly liquid: the passive sell pressure equals only about one day's turnover on a normal trading day, still within what the secondary market can absorb.

In other words, the passive sell pressure facing MSTR looks more like a fully anticipated short-term shock than a liquidity stampede.

The deeper, longer-term pressure lies in the financing flywheel that made Michael Saylor famous.

Strategy's business model uses the US equity market's fundraising capacity to keep issuing shares and buy bitcoin. As long as the share price stays above net asset value per share (mNAV), issuance accretes value for existing shareholders, creating a positive feedback loop.

But the key precondition for this flywheel to spin is that the stock maintains a valuation premium to net assets. Money from passive index funds is exactly the important buying that supports that premium.

As of now, Strategy's mNAV is 1.08x, already near multi-year lows. If index removal reduces long-term buying and the premium keeps narrowing or even turns into a discount to net assets, the issuance logic shifts from "accreting returns" to "diluting equity," and the flywheel will slow down.

Strategy's removal from MSCI's indexes directly affects demand for its stock, but indirectly hits its funding costs and its ability to keep buying bitcoin.

A subtle signal has already appeared. According to the 8-K Strategy filed with the SEC on November 9, the company sold about 2.05 million common shares between November 2 and 8, raising net proceeds of about $283.8 million. Of that, $188.3 million went to repurchasing STRC preferred stock, $81.9 million to buying 1,036 bitcoin, and the remaining $13.6 million to replenishing cash reserves.

In other words, the money used last week to repurchase STRC was already 2.3 times the money spent buying bitcoin.

This means Strategy's capital expenditure structure is becoming more complex: it must set aside substantial funds to maintain its capital structure, service preferred stock and hold liquidity reserves. Although it still has more than $10 billion of ATM issuance capacity on the books, without passive money holding it up, the dilution cost and funding maintenance cost of each issuance will rise significantly.

Strategy also acknowledged in its quarterly report that index removal could weaken its share price, liquidity and future fundraising ability.

That is the more profound impact of the MSCI removal: it will not knock MSTR down in one blow, but it will slow the capital efficiency of the financing flywheel.

A Thick Financial Cushion Keeps Stock Risk From Spreading to BTC

Whenever Strategy faces negative headlines, the question comes back: will the company sell bitcoin to repay debt?

Looking at the current financial structure, that worry is premature. Strategy's balance sheet has built a fairly thick financial cushion.

First, the maturity pressure on debt service is limited. Bitwise CIO Matt Hougan has repeatedly pointed out that the market's judgment on Strategy's debt repayment risk is far ahead of reality. Next September, only the principal on one roughly $1 billion convertible bond begins to be redeemed, leaving nearly a year of room to maneuver, and the real peak in debt repayment falls between 2028 and 2030.

Second, liquidity reserves are ample. The company holds a cash reserve pool of nearly $5 billion, designated for withstanding cycle troughs and repurchasing debt at a discount, not for speculation, and sufficient to cover more than three years of interest and preferred dividend payments.

Finally, the software business that many have forgotten still provides steady cash flow. It generates about $500 million of revenue a year; though far smaller than the bitcoin holdings, it is more than enough to cover debt interest. Strategy's pure debt interest expense is only about $50 million a year, which the recurring cash inflow from the software business alone can cover without touching its bitcoin reserves.

Despite Strategy's ample risk buffers, its recent share price has been lackluster.

It is market consensus that MSTR is highly correlated with BTC, and the stock's weak performance inevitably makes investors worry it will further aggravate bitcoin's downtrend.

Calculations by Sharpe Terminal also show that MSTR and BTC do indeed have a clear positive correlation at the level of daily returns.

However, besides being influenced by BTC's price, MSTR's stock is also driven by equity-level factors such as funding costs, share dilution, the premium to net assets and index fund flows, which makes its swings often sharper than bitcoin's.

The most direct evidence is the range-bound performance since word of the MSCI removal emerged. After MSCI formally finalized the non-operating company rules on October 15, Strategy's stock slid from a high of $151.29, falling to $122.35 when the list was published yesterday, a decline of nearly 20% over the period. In the same span, BTC fell less than 10% and the Nasdaq 100 dropped more than 7%.

The extra, excess drawdown is the separate pricing brought by index removal. Risk that belongs to the stock need not fully transmit to bitcoin.

Over a longer horizon, the same holds. Over the past year, MSTR has fallen about 45.5% in total, while bitcoin fell about 28.6% over the same period. Same direction, vastly different magnitude—that gap is precisely the risk differential between the stock and the underlying asset.

In the near term, MSTR's coming price adjustment is mainly a mean reversion at the valuation-logic level; whether it can keep the financing flywheel turning is the real challenge.

Join the official Coincamps community:

X: https://x.com/coincamps

Telegram: https://t.me/coin_camps