JPMorgan Says Strategy’s Sharp Slide Stems From Index-Risk Fears, Not Bitcoin Weakness

JPMorgan (JPM) says Strategy’s (MSTR) recent underperformance versus bitcoin BTC$86,349.64 is being driven less by crypto-market shifts and more by mounting concerns that the company could soon be removed from major equity indices.

In a report published Wednesday, the bank noted that Strategy’s once-sizeable premium over the value of its bitcoin holdings has mostly disappeared. The latest downturn, however, reflects rising anxiety ahead of a Jan. 15 decision from index provider MSCI, which may drop Strategy from key benchmarks.

Strategy, founded by Michael Saylor, is currently included in the Nasdaq 100, MSCI USA and MSCI World indexes. Out of its roughly $59 billion market value, JPMorgan estimates about $9 billion is held through passive investment products—ETFs and mutual funds that track those indices.

This index inclusion has effectively funneled indirect bitcoin exposure into retail and institutional portfolios. A removal from MSCI, the analysts said, could trigger an estimated $2.8 billion in passive outflows, with as much as $8.8 billion at risk if other index providers take similar action.

While active managers are not required to follow index changes, JPMorgan warned that losing a major benchmark seat would carry significant reputational costs and could weaken Strategy’s access to the equity and debt markets. Reduced index-linked demand may also hurt liquidity, diminishing the stock’s appeal to large investors.

The analysts added that Strategy’s combined equity, debt and preferred valuation relative to its bitcoin holdings is now the lowest since the pandemic. A negative MSCI ruling in January, they said, could push that ratio even closer to one—effectively tying the company’s valuation almost entirely to its bitcoin reserves.

Strategy shares were last up 3.5% in pre-market trading at around $193.