Bitwise CFO: Don't worry unnecessarily, Strategy will not sell Bitcoin.

Original author: Matt Hougan, Chief Investment Officer, Bitwise

Original translation by Luffy, Foresight News

Recently, my inbox has been flooded with questions about Strategy, a publicly traded Bitcoin reserve company. Specifically, people are mainly concerned about two issues:

1. Will MicroStrategy be removed from the MSCI index, leading to a forced sell-off of its shares?
2. Will MicroStrategy be forced to sell its Bitcoin holdings?

Let's analyze them one by one.

The correlation between MSCI index and micro-strategies

On October 10, MSCI announced it was considering removing crypto asset reserve companies (DATs) like MicroStrategy from its investable indices. This is significant because nearly $17 trillion in assets are benchmarked against these indices. JPMorgan Chase estimates that if MicroStrategy is removed from the indices, index funds could be forced to sell up to $2.8 billion worth of MSTR shares.

You might wonder: why is MSCI doing this? Its view is that crypto asset reserve companies like MicroStrategy are more like holding companies than operating companies. MSCI's investable indices already exclude holding companies such as real estate investment trusts, and most crypto asset reserve companies' business is simply buying and holding crypto assets. Therefore, MSCI believes they shouldn't have a place in the indices. After communicating with clients, MSCI will announce its final decision on January 15th.

I cannot predict MSCI's final decision. As a seasoned index researcher who served as editor of the academic journal *Index Journal* for ten years, I believe there are two possibilities. Michael Thaler and others have strongly refuted this, arguing that MicroStrategy is a legitimate, operating company with a robust software business and sophisticated financial engineering operations surrounding Bitcoin. This argument is reasonable, and I personally agree with its business nature. However, this is not a done deal, and I anticipate some institutions will hold the opposite view. Given the controversial nature of crypto asset reserve companies, and MSCI's current intention to remove them, I estimate there is at least a 75% probability that MicroStrategy will be removed from the index.

However, I don't believe that being removed from the index will have a significant impact on its stock. While a $2.8 billion sell-off seems large, based on my years of experience observing index inclusion and exclusion events, the actual impact is often smaller than expected and is usually priced in by the market beforehand. For example, when MicroStrategy was included in the Nasdaq 100 index last December, funds tracking the index needed to buy $2.1 billion worth of MSTR shares, but its stock price barely fluctuated.

I believe the slight decline in MSTR's share price since October 10th is partly due to the market already pricing in the expectation of its removal from the index. However, at this stage, its share price is unlikely to experience significant fluctuations.

In the long run, the value of MSTR depends on the effectiveness of its strategy execution, rather than whether index funds are forced to hold its stocks.

Micro-strategy and Bitcoin holdings

Another question is whether MicroStrategy will sell off its Bitcoin holdings. The bears' concerns are based on the following logic:

• Micro-strategy has been removed from the MSCI index;
• Its stock price plummeted, falling well below its net asset value (NAV);
• Ultimately, they were forced to sell their Bitcoin.

This logic seems plausible, but unfortunately, it's completely untenable. MSTR's stock price falling below its net asset value will not trigger a sell-off of Bitcoin; you can check the relevant details and calculate it yourself.

MicroStrategy's debt has only two key performance obligations: one is to pay approximately $800 million in interest annually, and the other is to convert or roll over some of its debt instruments when they mature.

Interest payments are not a concern in the short term. The company currently holds $1.4 billion in cash, which is more than enough to easily cover interest payments for a year and a half.

Similarly, debt conversion is not an immediate problem. The first batch of debt instruments will not mature until February 2027, and the size is only about $1 billion, which is a drop in the ocean for MicroStrategy, which holds $60 billion in Bitcoin.

If MSTR's stock price continues to decline, will insiders pressure the company to sell Bitcoin? The likelihood is extremely low. Michael Thaler himself controls 42% of the voting shares, and you'd be hard-pressed to find someone more convinced of Bitcoin's long-term value. MSTR's stock price was also trading at a discount in 2022, and he didn't sell then.

I understand why short sellers are so keen on hyping up the "doomsday" scenario for MicroStrategy. If MicroStrategy were forced to sell $60 billion worth of Bitcoin in one go, the impact on the entire Bitcoin market would be devastating, equivalent to two years' worth of inflows into a Bitcoin ETF. However, given that the company has no debt maturing before 2027 and sufficient cash to cover foreseeable interest expenses, this extreme scenario is highly unlikely. We should also look at the current situation from a broader perspective: at the time of writing, Bitcoin is priced at approximately $92,000, down 27% from its all-time high, but still 24% higher than MicroStrategy's average Bitcoin holding cost ($74,436). The so-called "doomsday" is nothing but nonsense.

in conclusion

If you're genuinely concerned about something in the crypto industry, there are several points worth noting. For example, I'm slightly worried about the pace of progress on market structure legislation at the congressional level, although I believe it will accelerate as government agencies return to normal operations. I'm also concerned that some small, poorly managed crypto asset reserve companies may go bankrupt. Furthermore, I anticipate that crypto asset reserve companies will not significantly increase their Bitcoin holdings in 2026, meaning the market will lose a crucial source of near-term demand.

But for micro-strategies:

• There is no need to worry about the impact of MSCI's decision on MicroStrategy's stock price. The actual impact is far less than most people expected, and it has most likely already been digested by the market.
• There is no reasonable mechanism in the short term that would force it to sell Bitcoin, and this situation is unlikely to occur.

A steadfast belief in Bitcoin comes at a price: calm and patience are essential when the market is volatile. No one understands this better than Thaler and MicroStrategy, because they also understand the other side of this patience. In the long run, this perseverance will ultimately pay off handsomely.