Bitwise CIO: Strategy Will Not Liquidate Its Bitcoin Holdings

BlockBeats News, December 4th, according to The Block, Bitwise Chief Investment Officer Matt Hougan refuted the claim that Strategy (formerly MicroStrategy) may be forced to sell its Bitcoin holdings. He described this premise as "completely incorrect" and pointed out that there is no requirement for the company to sell Bitcoin, whether due to index adjustments or market pressure.

In a report, Hougan responded to the numerous inquiries he has recently received, mainly focusing on two questions: whether Strategy would be removed from the MSCI index and whether this adjustment would compel the company to unwind its multibillion-dollar Bitcoin holdings. Hougan acknowledged that MSCI is indeed considering excluding digital asset treasury firms from its investable index and plans to make a decision on January 15th. Recently, JPMorgan estimated that if Strategy is removed, it could trigger passive fund selling of its stock totaling up to approximately $2.8 billion. Hougan also estimated the probability of Strategy's removal to be around 75%.

However, Hougan pointed out that historical experience indicates that the inclusion or removal from an index has a much smaller impact on prices than investors commonly fear. He mentioned that when Strategy was included in the Nasdaq 100 index last year, passive funds were forced to buy around $2.1 billion worth of stock, but "the stock price hardly fluctuated." He added that the decline in Strategy's stock price since October 10th is likely the market pricing in the possibility of removal in advance, and he does not expect to see "significant two-way volatility" in the future.

Hougan stated that investors' greater concern is that once removed from the MSCI, it may trigger a "downward spiral": index removal leading to a stock price drop, the price significantly falling below net asset value (NAV), ultimately forcing Strategy to sell Bitcoin to stabilize its financial position. Regarding this, Hougan believes that this logical chain of events does not hold. Even if the stock price falls below NAV, it will not compel the company to sell Bitcoin at any level. The company has mainly two obligations on its debt side—annual interest payments of around $800 million and corresponding dispositions at debt maturity—and neither of these will create immediate pressure to sell Bitcoin.