Bitcoin company Strategy, formerly known as MicroStrategy, may be removed from the MSCI Index. The world’s largest bitcoin investor has confirmed it is in discussions about the matter, a move that could cost the company billions in investments. Read on below.
Strategy Facing Removal from MSCI Index? #
American bank JP Morgan already predicted this last month. At the time, the bank stated that the MSCI stock index was considering scrapping Strategy because the company holds too much bitcoin.
Inclusion in a stock index is crucial for listed companies, as many stock market investors base their investments on them. Investments are then automatically diversified among all included companies in a stock index. If a company is included in a stock index, it means that money automatically flows into it.
However, MSCI would be considering removing Strategy from the MSCI USA and MSCI World stock indices. The reason is a new policy rule, which stipulates that the corporate assets of companies on the index may consist of no more than 50 percent crypto.
The Bitcoin Investment Company #
Strategy, however, is a bitcoin company focused on using all investments in the company to buy bitcoin. The company grew in this way to become the world’s largest buyer and holder of bitcoin, with nearly 700,000 bitcoin on its corporate balance sheet worth about €55 billion.
A significant portion of that money comes from investors who invest based on the MSCI index. According to JP Morgan analysts, this could be an amount of up to €7.5 billion. Removal from the index could mean that these investments are withdrawn.
Michael Saylor, the founder of Strategy, confirmed to Reuters that he is currently in talks with MSCI about the issue. He added that he is ’not sure’ if JP Morgan’s figures are correct.
Potential Impact on Bitcoin’s Price #
If Strategy is removed from the index and billions flow out of the company’s shares, the impact could spill over to the entire crypto market. If Strategy’s share price falls, the company could be forced to sell bitcoin. Those sales could push the bitcoin price down further, causing Strategy’s shares to fall even more and the company to sell bitcoin again—in a kind of downward spiral.
For now, it hasn’t gotten that far, and Strategy is still buying more. Nevertheless, the company’s share price has already fallen by about 37 percent since the beginning of this year. The question is how much leeway the company still has before it is forced to sell as a ’last resort'.