JPMorgan analysts have issued a stark warning regarding potential outflows from MicroStrategy (MSTR), projecting that if the global finance company MSCI decides to exclude the Bitcoin treasury giant from its equity indices, outflows could reach as much as $2.8 billion. Exacerbating the situation, should other exchanges follow MSCI’s lead, outflows could soar to an alarming total of $11.6 billion.
The recent decline in MSTR’s share price, which has plummeted over 40% in the past month, is attributed primarily to heightened concerns surrounding the company’s potential removal from key equity indices, such as those managed by MSCI, Nasdaq 100, and Russell 1000. Analysts emphasized that these developments have overshadowed Bitcoin’s price slump itself, highlighting how crucial index inclusion has been for enabling indirect Bitcoin exposure in both retail and institutional investor portfolios.
MSCI is currently contemplating a proposal to exclude companies like MicroStrategy that derive at least 50% of their holdings from Bitcoin or other cryptocurrencies. The organization initiated a “consultation” period last month, which will continue through the end of the year, with a decision expected by January 15.
MicroStrategy, headquartered in Tysons Corner, Virginia, has been grappling with significant challenges as Bitcoin prices continue to decline. According to data from SaylorTracker, the company’s market value has dropped to $51 billion, reflecting a mere 0.90 premium against its estimated $56 billion Bitcoin stockpile. This premium, often referred to as multiple-to-net asset value (mNAV), has fallen sharply from a ratio of 2.7 a year ago.
Despite the turbulent environment, Executive Chair Michael Saylor has publicly refuted rumors suggesting that the company is liquidating parts of its Bitcoin holdings. On Thursday, MSTR shares fell by 5.1%, landing at $177.13 according to Yahoo Finance data.
JPMorgan’s analysis disclosed that index-focused funds hold a substantial percentage of MicroStrategy shares, indicating that any exclusion from significant indices could negatively impact market sentiment. Although active managers are not required to adhere to index changes, analysts warned that such exclusions could undermine MicroStrategy’s ability to raise both equity and debt in the future, potentially leading to reduced trading volumes and liquidity.
Moreover, Bitcoin itself has seen a decline, slipping 3.4% within a single day to approximately $87,100, and more than 22% over the last month. This downturn follows a record high earlier in October and reflects growing macroeconomic concerns. Recent job data and diminishing expectations around interest rate cuts have contributed to this weakening sentiment in digital asset markets.
In a prediction exercise on Myriad, a unit of Dastan, participants anticipate only a 20% chance that Bitcoin will reach $115,000 in its next move, with the risk of further decline to $85,000. This outlook represents a significant shift from earlier trendlines and underscores a general pessimism among investors.
