JPMorgan sees ‘bloodbath’ risk if major index cuts ties with Strategy
Analysts at JPMorgan are sounding the alarm over a structural risk hanging over Strategy (the rebranded MicroStrategy), warning that the company’s heavy reliance on passive index inclusion could turn into a brutal sell-off if a key benchmark provider decides to drop the stock.
According to the bank’s research, more than one-fifth of Strategy’s market capitalization is effectively “parked” in passive index funds. Those funds are required to hold whatever the index tells them to hold — but the same mechanism works in reverse. If Strategy is removed from those benchmarks, index-tracking funds would be forced sellers, potentially unleashing billions of dollars in selling pressure in a very short time.
MSCI decision could trigger multibillion-dollar outflows
The most immediate threat comes from MSCI, one of the world’s most influential index compilers. Analysts at JPMorgan, led by Nikolaos Panigirtzoglou, estimate that Strategy stands to lose roughly 2.8 billion dollars in market value if MSCI excludes the stock from its flagship indices, including MSCI USA and MSCI World.
The situation could escalate further if other index providers follow MSCI’s lead. In that scenario, JPMorgan calculates that Strategy might ultimately face up to 8.8 billion dollars of additional value at risk, as more passive funds unwind their exposure. For a company whose share price has become closely tied to the Bitcoin narrative, such forced selling could amplify volatility dramatically.
Why MSCI is reconsidering crypto-focused treasury stocks
This potential reshuffling has its roots in a policy review MSCI began last month. The index provider is considering a rule change that would bar companies from its indices if cryptoassets make up at least 50% of their total assets. Strategy, whose balance sheet is overwhelmingly dominated by Bitcoin, clearly falls into that category.
The consultation period is ongoing, with MSCI scheduled to announce its final decision on January 15, 2026. While nothing is set in stone yet, even the prospect of exclusion has been enough to focus attention on how dependent Strategy has become on index flows — and how vulnerable it might be if those flows reverse.
How passive indices quietly shape corporate fortunes
Over the past decade, passive investing has gone from a niche approach to the backbone of global markets. Instead of picking individual stocks, both retail and institutional investors increasingly allocate capital to index funds and ETFs that mirror major benchmarks based on geography, sector, or market capitalization.
Inclusion in these indices is more than a prestige marker. It delivers a steady stream of “automatic” demand: whenever new money enters an index fund, a portion is directed toward every company in the benchmark, regardless of short-term sentiment or analyst recommendations. That quiet, persistent bid can support liquidity and valuations.
The flip side is brutal. Once a stock is removed from a widely followed index, every fund tracking that benchmark has to sell, often on a tight timetable. For large, liquid names the impact can be painful; for companies with a highly specialized shareholder base, it can be destabilizing. JPMorgan’s “bloodbath” language reflects this mechanical, non-discretionary wave of selling that could hit Strategy if multiple indices decide it no longer qualifies.
Strategy’s current index footprint
At present, Strategy enjoys a notable presence across several key benchmarks. Beyond its inclusion in MSCI indices, the company is part of the Nasdaq 100 and the S&P 600, giving it exposure to a broad universe of passive and quasi-passive investors.
Yet there is a conspicuous gap: Strategy has not been admitted to the S&P 500, despite frequently lobbying for inclusion and, by many accounts, satisfying the technical criteria such as market capitalization and profitability. The omission underscores how index committees sometimes apply qualitative judgments, especially when a company’s business model or balance sheet is considered unconventional or unusually risky.
If MSCI takes a hard line on crypto-heavy treasuries, it could embolden other index providers to revisit how they treat companies whose value is tightly intertwined with a single, highly volatile asset class like Bitcoin.
Saylor’s conviction: volatility is a feature, not a bug
While analysts debate systemic risks, Strategy’s co-founder and executive chairman Michael Saylor projects an almost unshakeable calm. He has long framed Bitcoin volatility as a necessary phase in the monetization of a new asset, not as a sign of structural weakness.
Saylor argues that Bitcoin’s volatility has been moderating over time. In his view, relative to traditional equity benchmarks, Bitcoin’s swings have already narrowed — from around four times the volatility of major indices in 2020 to roughly double that level today. Ultimately, he envisions BTC stabilizing at about 1.5 times the volatility of the S&P 500, while still, in his words, “outperforming it over the long term.”
Even as Bitcoin slid nearly 11% in the last week to trade around 91,700 dollars, Saylor told financial media that nothing about Strategy’s playbook is changing. Short-term drawdowns, he maintains, serve to eject “weak hands” from the market, strengthening the base of long-term holders.
“The company is engineered to take an 80% to 90% drawdown and keep on ticking,” he has said, describing Strategy as “pretty indestructible” in the face of Bitcoin bear markets or macro shocks.
A balance sheet built around Bitcoin
Despite the swirling controversy, Strategy continues to expand its Bitcoin holdings with almost mechanical regularity. The firm now controls approximately 649,870 BTC, a stash worth about 59.5 billion dollars at recent prices. This position makes it the largest corporate holder of Bitcoin globally and effectively turns the company into a leveraged, publicly traded Bitcoin proxy.
Saylor insists that the balance sheet remains robust even though the company’s stock has cooled from earlier highs, recently touching a one-year low before recovering modestly. From his perspective, the volatility in Strategy’s share price is an inevitable byproduct of its chosen strategy rather than a signal to reverse course.
Rumors, rebuttals, and fresh purchases
Market turbulence has inevitably fueled speculation that Strategy might be quietly unloading Bitcoin to protect its equity value or service obligations. Saylor has moved quickly to deny such rumors, insisting that not a single coin has been sold.
On social media, he went further, claiming that Strategy had been purchasing Bitcoin every day during mid-November and then disclosing a fresh block acquisition of 8,178 BTC, valued at roughly 835 million dollars. With an average acquisition price of 74,443 dollars per coin, the company still holds a healthy unrealized profit on its position, even after recent volatility.
These disclosures are more than just talking points; they function as a persistent signal to the market that Strategy remains all-in on its Bitcoin thesis, regardless of noise about indices or short-term price action.
Institutional money keeps circling Strategy
Despite — or perhaps because of — the company’s extreme positioning, institutional investors have not turned away. Canada’s CPP pension plan recently reported an 80 million dollar stake in Strategy, while Florida’s state pension fund disclosed a 47 million dollar position.
For such institutions, Strategy offers highly liquid, regulated exposure to Bitcoin via a listed equity, avoiding the operational and custodial complications of holding the cryptocurrency directly. That appeal has remained intact even as concerns mount regarding index exclusion and regulatory reclassification of crypto-treasury firms.
Saylor’s message here is straightforward: Bitcoin is functioning as intended, Strategy is structurally prepared for turbulence, and anyone panicking is misreading both the asset and the company’s design.
What index exclusion would mean in practice
If MSCI ultimately moves forward and removes Strategy from its indices, the immediate consequence would be large-scale forced selling. Every fund that passively tracks MSCI USA or MSCI World — from broad global ETFs to institutional mandates — would have to reduce its holdings in tandem, typically over a short rebalancing period.
This kind of selling is price-insensitive. Funds do not wait for a “good” price; they simply execute the trades required to match the new index composition. The result can be sharp, sudden downward pressure on the affected stock, even if nothing fundamental about the underlying business has changed.
Beyond the initial shock, index exclusion could reduce Strategy’s ongoing access to that steady stream of passive inflows that many large-cap companies have come to rely on. Liquidity might thin out at the margins, bid-ask spreads could widen, and the shareholder base could become even more dominated by speculative traders and concentrated long-term believers rather than diversified index funds.
Strategic crossroads: pure Bitcoin vehicle or diversified tech firm?
All of this raises a bigger strategic question for Strategy: can a public company thrive in mainstream equity markets while being, in effect, a highly leveraged Bitcoin holding vehicle? Or will increased scrutiny from index providers and regulators force it to reconsider the balance between its software operations and its crypto treasury?
One path would be to diversify the balance sheet or adjust treasury policies to ensure that Bitcoin does not cross thresholds that trigger automatic exclusions. Another, more radical path would be to embrace the role of a specialized Bitcoin entity and accept that it may no longer fit neatly inside broad-market benchmarks.
For now, Saylor shows no appetite for dilution of his vision. He continues to portray Strategy’s conversion of its balance sheet into Bitcoin as a once-in-a-generation capital allocation decision, designed to protect shareholder value against currency debasement and to capture upside from what he sees as the best-performing asset of this era.
Broader implications for crypto-linked equities
Whatever MSCI decides in 2026, the debate around Strategy has implications that stretch well beyond a single stock. If large index providers formalize rules that penalize or exclude companies holding significant cryptoassets, corporates considering a Bitcoin treasury strategy will have to weigh the trade-off between potential upside and the risk of being pushed to the fringes of mainstream capital markets.
It could also accelerate the emergence of more specialized indices and funds catering specifically to crypto-intensive firms, while “core” benchmarks become more conservative about balance sheets dominated by volatile alternative assets.
For investors, the situation is a live case study in how modern market plumbing — from index rules to passive flows — can dramatically amplify or mute the financial consequences of strategic decisions. Strategy’s bet on Bitcoin has always been bold. MSCI’s pending decision, and any dominoes that fall after it, will determine just how costly that boldness might become in the age of passive investing.