JPMorgan: Strategy’s Weak Performance Tied to Indexing Fears, Not Crypto Market Softness
JPMorgan (JPM) says Strategy’s (MSTR) prolonged lag behind bitcoin BTC$86,349.64 has less to do with recent crypto-market movements and more to do with growing concerns that the company may be pushed out of major equity benchmarks.
In a report published Wednesday, the bank said Strategy’s once-large premium to the value of its bitcoin holdings has mostly unwound. What’s pressuring the stock now, it argued, is the prospect of MSCI removing the firm from key indices when it announces its Jan. 15 review.
The Michael Saylor–led company is currently included in the Nasdaq 100, MSCI USA and MSCI World benchmarks. According to JPMorgan, about $9 billion of Strategy’s roughly $59 billion market cap sits in passive ETF and mutual fund products tied to those indices.
This embedded index footprint has served as a channel through which bitcoin exposure has entered a wide range of retail and institutional portfolios. If MSCI cuts Strategy, passive outflows alone could total roughly $2.8 billion, with up to $8.8 billion potentially at risk if other index providers echo the move, the analysts said.
Even though active managers don’t have to follow index changes, JPMorgan warned that losing major benchmark status would still carry significant consequences. It could hurt the company’s reputation, complicate access to capital markets, and thin trading liquidity—making the stock less attractive to large institutional investors.
JPMorgan also noted that Strategy’s combined value across equity, debt and preferred securities relative to its bitcoin holdings is at its lowest level since the pandemic. A negative MSCI decision in mid-January could push this ratio even closer to one, effectively tying the company’s valuation almost entirely to its bitcoin reserves.
In pre-market trading, Strategy shares were up about 3.5% near $193.
