The cryptocurrency market, particularly firms heavily invested in Bitcoin, breathed a collective sigh of relief recently when a major threat of forced stock sell-offs was averted. However, this reprieve for companies like MicroStrategy (often referred to simply as Strategy in market circles) comes with a significant and subtle structural change. This alteration fundamentally redefines the economics of what has been colloquially known as the 'Bitcoin Treasury' trade, potentially closing the door on an 'infinite money loop' for investors.
On January 6, MSCI Inc., a dominant benchmark provider for global equity and ETF markets, announced a crucial decision. It confirmed that 'Digital Asset Treasury Companies' (DATCOs), firms holding 50% or more of their total assets in digital assets, would retain their place in its global indices for the February 2026 review. This move spared companies such as MicroStrategy from what could have been a devastating expulsion.
"For the time being, the current index treatment of DATCOs identified in the preliminary list published by MSCI of companies whose digital asset holdings represent 50% or more of their total assets will remain unchanged," MSCI stated, offering a moment of triumph for many.
Following this announcement, Michael Saylor, MicroStrategy's executive chairman and a vocal Bitcoin proponent, publicly celebrated the company's victory in maintaining its position within the benchmark.
The Hidden Clause: A Technical Freeze on Growth
Yet, beneath the surface of this apparent win lies a critical caveat. MSCI simultaneously introduced a technical freeze on the share counts for these very entities. This nuanced, yet impactful, decision effectively severs the once-automatic link between new equity issuance by DATCOs and the subsequent passive buying by index-tracking funds.
MSCI clarified its new stance: "MSCI will not implement increases to the Number of Shares (NOS), Foreign Inclusion Factor (FIF) or Domestic Inclusion Factor (DIF) for these securities. MSCI will defer any additions or size-segment migrations for all securities included in the preliminary list."
What this means in practical terms is profound. While the immediate 'downside' of a forced liquidation, which could have triggered billions in passive selling, has been removed, the 'upside' mechanics that fueled the index trade have been fundamentally dismantled. The initial market reaction, a surge of over 6% in MicroStrategy’s stock, primarily reflected relief that a catastrophic liquidity event was off the table, rather than a full understanding of the long-term implications.
Indeed, financial giants like JPMorgan had previously suggested that a complete exclusion from MSCI indices could have triggered between $3 billion and $9 billion in passive selling of MSTR shares. Such a significant outflow would likely have crushed MicroStrategy's stock price and potentially forced the liquidation of its substantial Bitcoin holdings. The averted threat of exclusion, therefore, masks a new reality where a powerful, automatic demand lever for these stocks has been deactivated.
Dismantling the Mechanical Bid: The End of an Era
Historically, MicroStrategy leveraged a unique mechanism to fund its aggressive Bitcoin accumulation strategy. When the company issued new shares to raise capital for Bitcoin acquisitions, the index provider, after some time, would update the share count to reflect the larger float. Consequently, passive funds and ETFs tracking the index were then mathematically compelled to buy a pro rata portion of the newly issued shares. This was essential to minimize their tracking error against the benchmark.
This process created a guaranteed, price-insensitive source of demand that helped absorb dilution and effectively supported MicroStrategy's ability to issue equity at favorable terms. It was, for all intents and purposes, a self-perpetuating cycle, often referred to as an 'infinite money glitch' in some crypto circles.
Under MSCI's new 'freeze' policy, this powerful loop is decisively broken. Even if MicroStrategy substantially expands its float to raise significant capital, MSCI will effectively disregard those new shares for its index calculation purposes. The company’s weight within the index will not increase, and as a direct consequence, ETFs and index funds will no longer be forced to purchase the newly issued stock.
Market analysts are quick to point out that this fundamental shift forces MicroStrategy and its peers to return to a more traditional reliance on market fundamentals. Without the automatic backstop of benchmark-tracking demand, these companies must now actively court demand from discerning active managers, hedge funds, and retail investors to absorb any new supply of shares.
Quantifying the Liquidity Gap: A Significant Challenge
To truly grasp the magnitude of this shift, market researchers are now modeling the 'lost bid' that issuers like MicroStrategy must contend with. Bull Theory, a crypto research firm, provided a clear quantification of this emerging liquidity gap in a recent client note. The firm posited a hypothetical scenario involving a treasury company with 200 million outstanding shares, where roughly 10% are typically held by passive index trackers.
In Bull Theory's model, if such a company were to issue 20 million new shares to raise capital, the old index mechanics would eventually mandate that passive funds purchase 2 million of those shares. At a theoretical price point of $300 per share, this would represent a substantial $600 million of automatic, price-insensitive buying pressure. However, under MSCI’s new freeze, Bull Theory notes that this $600 million bid now completely disappears, falling to zero.
"Strategy now must find private buyers, offer discounts, or raise less money," Bull Theory stated, highlighting the stark new reality.
This elimination of forced demand from index funds presents a significant hurdle for MicroStrategy. The company famously issued more than $15 billion in new shares throughout 2025 to aggressively accumulate Bitcoin. If MicroStrategy attempts to replicate that scale of issuance in 2026, it will do so in a market completely devoid of passive support. Without that structural bid, the risk of a price correction during dilution events increases dramatically.
ETFs Emerge as Silent Winners in a Shifting Landscape
MSCI's strategic decision to cap these companies rather than expel them entirely, or indeed leave them untouched, has also significantly altered the competitive dynamics within the broader asset management sector. Over the past year, US spot Bitcoin ETFs have matured considerably as an asset class, attracting substantial institutional interest. This growing demand even led MSCI's former parent company, Morgan Stanley, to file for its own Spot Bitcoin ETF.
From this vantage point, MicroStrategy effectively competes with these fee-bearing Bitcoin ETFs, offering investors an alternative way to gain passive Bitcoin exposure through an operating company structure. By freezing the index weighting of DATCOs, the new rule subtly degrades their ability to efficiently scale via equity markets and cheaply raise capital.
If MicroStrategy’s ability to raise capital at attractive rates is curtailed, large allocators may very well rotate capital out of the corporate equity and into Spot ETFs. These ETFs do not carry the operational risks associated with a single company, nor do they typically exhibit the premium-to-NAV volatility that MicroStrategy's shares have often experienced. This potential flow of funds would directly benefit the issuers of spot ETFs, including major Wall Street banks, effectively allowing them to capture fees previously reflected in the equity premiums of DATCOs.
By effectively neutering the 'flywheel' effect of the treasury strategy, the index provider may have, perhaps inadvertently or intentionally, leveled the playing field significantly. This shift ultimately favors traditional asset management products, marking a new chapter in how investors gain exposure to digital assets.
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