JPMorgan: Strategy’s Decline Driven by Index-Risk Fears, Not Crypto Market Trends
JPMorgan (JPM) says Strategy’s (MSTR) sharp underperformance relative to bitcoin BTC$86,349.64 in recent months is being fueled primarily by concerns over its potential removal from major equity indices, rather than shifts in crypto fundamentals.
In a report released Wednesday, the bank noted that Strategy’s once-elevated premium to its bitcoin holdings has already narrowed significantly. The latest leg lower, however, reflects investor anxiety ahead of MSCI’s Jan. 15 index-review decision, which could see the company excluded from key benchmarks.
Strategy—founded and led by Michael Saylor—is currently included in several major indices, including the Nasdaq 100, MSCI USA and MSCI World. Of its roughly $59 billion market cap, JPMorgan estimates about $9 billion is tied to passive investment products that track these benchmarks.
That embedded index presence has served as a pipeline through which bitcoin exposure has entered both institutional and retail portfolios. If MSCI removes Strategy, the analysts said, passive outflows could reach $2.8 billion. Should other index providers follow suit, as much as $8.8 billion could potentially exit.
JPMorgan added that even though active fund managers are not obligated to mimic index changes, losing a spot in these benchmarks would significantly hurt Strategy’s market credibility. It could also make future capital-raising more difficult and reduce trading liquidity—two factors that typically deter large institutional investors.
The bank highlighted that Strategy’s combined equity, debt and preferred valuation relative to its bitcoin holdings is already at its weakest point since the pandemic. A negative ruling on Jan. 15 could push that valuation ratio even closer to parity, effectively anchoring the company’s worth to its bitcoin reserves.
Shares of Strategy were up 3.5% in pre-market trading, near $193.
