“MSTR may be removed from the MSCI index” ignites conflict, “crypto circle little Deng” battles “Wall Street old Deng” drama unfolds

A proposal regarding MicroStrategy (MSTR) potentially being removed from the MSCI index has sparked a clash of ideologies between cryptocurrency supporters and traditional financial institutions. A storm of "crypto circle" versus "Wall Street" is brewing.

Recently, index giant MSCI released a consultation document proposing to exclude "digital asset treasury companies" from its global investable market index. According to MSCI's definition, such companies refer to those whose digital asset holdings exceed 50% of total assets, or those that claim to be digital asset treasuries primarily financing to increase Bitcoin holdings.

MSCI explicitly questioned in the document whether these companies "exhibit characteristics similar to investment funds," which are typically excluded from stock benchmark indices. This is the crux of the debate: Are these "digital asset treasury companies" innovative operational entities, or are they investment funds disguised as companies?

This move immediately triggered a chain reaction in the market. Wall Street giant JP Morgan released an analysis report warning that if MicroStrategy were excluded, it would put "immense pressure" on its valuation. Analysts at the bank stated that approximately $9 billion of MicroStrategy's then market capitalization of about $59 billion was held by passive investment vehicles tracking major indices.

The bank estimated that MSCI's action alone could trigger about $2.8 billion in forced selling by passive funds; if Russell and other index providers follow suit, the total sell-off could reach as high as $8.8 billion.

Another investment bank with a 107-year history, TD Cowen, also indicated that it expects MSCI to ultimately exclude all such "digital asset treasury companies" from its index.

Strong Resistance from the "Crypto Circle," Even Calling for Shorting JP Morgan

MSCI's proposal and JP Morgan's analysis have sparked strong backlash on social media and within the cryptocurrency community. Some cryptocurrency supporters have publicly called for a boycott of JP Morgan and to short its stock. They accuse the bank of potentially "front running," meaning they set up positions before releasing negative reports to profit from the downturn.

The cryptocurrency community believes that "digital asset treasury companies" provide restricted institutional investors with a way to indirectly track Bitcoin through stock exposure, and the index exclusion could weaken this channel. MicroStrategy's Executive Chairman Michael Saylor responded that the company is neither a fund, trust, nor holding company, but an operational enterprise with a $500 million software business that uses Bitcoin as "productive capital."

Meanwhile, the founder of MicroStrategy firmly defends its business model. This controversy is not only about the fate of one company but could also accelerate the rotation of channels for institutional investors to gain Bitcoin exposure, shifting from proxy stocks to more clearly regulated spot ETFs.

"Housekeeping" by the Index Giant

On the surface, MSCI's proposal appears to be a routine "housekeeping" of the index. In its consultation document released in October, MSCI raised a fundamental question: Do these companies with significant digital asset holdings "exhibit characteristics similar to investment funds"? The background of this issue is that mainstream stock indices typically exclude investment tools such as exchange-traded funds (ETFs), closed-end funds, and investment trusts to ensure that the index constituents represent operating companies in the real economy. MSCI's move is an attempt to clarify whether a software company has crossed the line between operating companies and investment tools when its balance sheet is dominated by Bitcoin.

According to MSCI's timeline, the final decision on the relevant rules will be announced on January 15, 2026, and is planned to be implemented in the index review in February 2026. This seemingly technical adjustment could have profound implications for an emerging category of stocks.

A Philosophical Debate on "Definition"

At the core of this event is a profound ideological conflict regarding how to define these new types of companies. Bloomberg columnist Matt Levine conducted an in-depth analysis, summarizing two opposing viewpoints in the market.

The viewpoint supporting their classification as ordinary stocks argues:

1. They are legally stocks.

2. Most of them have other businesses besides holding cryptocurrencies (such as MicroStrategy's $500 million software business), and therefore should be regarded as operating companies in a special industry.

3. For institutions that cannot directly invest in cryptocurrencies due to compliance restrictions, these stocks provide a legitimate alternative exposure.

In contrast, the opposing viewpoint is sharper:

1. They are essentially investment funds, and investment funds have traditionally been excluded from mainstream indices like the S&P 500.

2. The so-called "operating business" is merely a façade, and their stock prices primarily reflect the value of the cryptocurrencies they hold.

3. Allowing stock funds to "mix in" cryptocurrency assets in this way undermines the original intention of investors to purchase pure stock exposure.

Michael Saylor, co-founder of MicroStrategy, firmly opposes the "fund" label.

He emphasizes that the company is not a fund, trust, or holding company, but a publicly traded company that utilizes a unique treasury strategy to treat Bitcoin as productive capital. Changes in index classification will not affect the company's operational methods. He repositions the company as a "Bitcoin-supported structured finance company" to highlight its operational attributes.

Market Impact: Rotation from Proxy Stocks to Spot ETFs

Regardless of the final definition, MSCI's actions may accelerate a market trend that is already occurring: institutional capital rotating from "Digital Asset Treasury" (DATs) stocks to spot Bitcoin ETFs.

According to a report by DLA Piper, as of September 2025, over 200 publicly listed companies in the U.S. have adopted digital asset treasury strategies, holding approximately $115 billion in cryptocurrencies. These companies provide a convenient "workaround" for traditional financial institutions. However, this convenience comes with structural weaknesses, such as the pressure to sell assets to repurchase stock when the stock price falls below the net value of the cryptocurrencies held At the same time, the spot Bitcoin ETF has surpassed $100 billion in assets under management in less than a year since its launch. These ETFs provide a purer and lower-leverage risk exposure to Bitcoin, avoiding the complex balance sheet issues of treasury stocks.

Therefore, MSCI's proposal is a "clear liquidity negative event" for these proxy stocks. Once index funds sell MSTR, they will not turn to buy Bitcoin ETFs but will instead purchase other stocks to fill the index vacancy. While this does not directly lead to Bitcoin being sold off, the secondary effects cannot be ignored: treasury companies facing stock price and financing pressures may weaken their ability to purchase Bitcoin in the future, and may even be forced to sell part of their holdings.

According to a table compiled by CryptoSlate, in addition to MicroStrategy, crypto mining companies such as Riot Platforms and Marathon Digital are also included in MSCI's preliminary watchlist, constituting potential "long-tail" liquidity risks. Ultimately, this turmoil will force the market to make a choice: should Bitcoin exposure exist within stock benchmark indices, or should it belong to specialized crypto investment products?