The market remains uncertain due to recent stock price fluctuations in Strategy, Inc. (MSTR), the publicly traded company with the largest amount of Bitcoin (BTC) in its vaults.
The company’s stock price has plummeted, raising alarms that it may be removed from the MSCI stock index.
But Matt Hogan, Bitwise’s chief investment officer, has an encouraging view. He said that due to market pressures, “Strategy will not sell Bitcoin.”
Market concerns: MSCI and forced sales
The main concerns among investors boil down to two key questions: “Will[Strategic]be removed from MSCI and there will be a forced sale of his shares?” and “Will he be forced to sell his Bitcoin?” Hogan says.
The strategy has been in the spotlight since the stock market has fallen 25% in the past month and 50% in the past six months, further deteriorating the position of one of the major stock indexes, MSCI. MSCI announced that it is considering Exclude companies like Strategy that hold large amounts of assets in digital assets from the list.
Hogan elaborated on MSCI’s view that companies with Bitcoin vaults are “more like holding companies than operating companies.” MSCI’s investment index excludes holding companies such as REITs (real estate investment trusts that are listed on stock exchanges and are required to distribute a large portion of their profits in the form of dividends).
“Since many (companies with digital asset vaults) only buy and hold crypto assets, MSCI does not believe they deserve to be included in the index.”
“We don’t know what MSCI will decide,” said a Bitwise analyst. “As an index expert, I think this could go in any direction. Given how conflicted companies are on digital asset treasury, and given that MSCI is currently leaning toward delisting digital asset treasury, I would estimate there is at least a 75% chance that Strategy will be ousted.”
Actual impact of Strategy’s potential exclusion from MSCI
Despite Strategies’ likely removal from the index, Hogan is “not convinced that its removal will have a significant impact on the stock price.”
The potential for forced stock sales is estimated at about $2.8 billion, Hogan said. However, Bitwise’s chief investment officer said, “My experience of observing index additions and deletions over the years is that the effect is smaller than typically thought and will be discounted long ago.”
analyst We believe the market is already discounting the exit.. He believes the decline in MSTR value since October 10 is due to the market having already “priced in” its departure from the index. In the long run, the company’s value “will be determined by how well it executes on its strategy, not whether index funds are forced to own it.”
No-obligation strategy to sell Bitcoin
The fire sale argument assumes that if Strategy’s stock price crashes and falls significantly below its net asset value (mNAV), Strategy would be forced to sell its BTC. Hogan categorically denies this theory..
“That argument seems logical. Unfortunately for the bears, it is completely false. There is nothing that would force the MSTR price to fall below its net asset value to sell,” the Bitwise executive explains.
The company has two related obligations in connection with its debt. Interest and renewal or conversion of certain debt instruments. “We are required to pay approximately $800 million in interest annually related to our debt and are required to convert or roll over certain debt instruments as they mature,” Hogan explained.
However, interest payments are “not a short-term concern” as the US company raised funds through stock sales rather than Bitcoin and has set aside $1.44 billion in reserves. Additionally, “Debt conversion is also not an immediate issue, as the initial debt instrument does not mature until February 2027. Even if it were, it would only be around $1 billion, a small amount. For context, the company holds $60 billion in Bitcoin.”
“Fraud” in the strategic model
Despite Hogan’s optimistic vision for the future of Strategy’s Bitcoin holdings, Peter Schiff, an economist and investor known for disparaging digital assets, harshly criticized the company, declaring, “The stock is bankrupt and the business model is a scam,” CriptoNoticias reported.
These criticisms arose as a result of Strategy’s creation of new reserves. The investor interpreted the move as “the beginning of the end for MSTR” and questioned the viability of the company’s business model, with Strategy President Michael Saylor saying he was “forced to sell shares not to buy Bitcoin, but simply to buy USD to cover MSTR’s interest and dividend obligations.”
Michael Saylor’s beliefs and CEO explanation
Finally, If stock prices continue to fall, executives are unlikely to sell Bitcoin.mainly due to Thaler’s influence.
Saylor himself “controls 42% of the voting stock,” and “you’d be hard-pressed to find someone more confident about the long-term value of Bitcoin,” Hogan said.
Hogan urges the focus to be on other ecosystem concerns, such as slow progress on market structure laws and the future of other “small and poorly managed” digital asset vaults. “There is no need to worry about the impact of MSCI’s decision on stock prices… There can be no short-term mechanism that would force us to sell Bitcoin. “That’s not going to happen.”
However, despite Hogan’s reassuring vision, MicroStrategy itself has confirmed through CEO Von Leh that it is willing to sell small amounts of Bitcoin if absolutely necessary to keep the company solvent, under extreme and highly unlikely circumstances.
This means that despite Hogan and other investors’ expectations, there are certain points of failure that could trigger Strategy to liquidate (even partially) its Bitcoin holdings.
