Original Article Title: No, Virginia, Strategy Is Not Going To Sell Its Bitcoin

Original Article Author: Matt Hougan, Chief Investment Officer at Bitwise
Original Article Translation: Luffy, Foresight News

Lately, my inbox has been flooded with inquiries about Bitcoin reserve-holding company MicroStrategy's potential actions, with a focus on two main questions:

1. Will MicroStrategy be removed from the MSCI index, leading to forced selling of its stock?

2. Will MicroStrategy be forced to sell its held Bitcoin?

Let's analyze these questions one by one.

MSCI Index and MicroStrategy Connection

On October 10, MSCI announced that they are considering removing crypto asset treasury reserve companies (DAT) like MicroStrategy from their investable indices. This is significant as around $17 trillion of assets are benchmarked to these indices. JPMorgan estimated that if MicroStrategy is removed from the index, index funds may be forced to sell up to $2.8 billion worth of MSTR stock.

You might wonder: Why is MSCI doing this? Their view is that crypto asset treasury reserve companies like MicroStrategy are more akin to holding companies rather than operating companies. MSCI's investable indices already exclude holding companies such as real estate investment trusts, and since most crypto asset treasury reserve companies' business is solely to buy and hold crypto assets, MSCI believes they should not be included in the index. Following discussions with clients, MSCI will announce their final decision on January 15.

I cannot predict MSCI's final ruling. As a seasoned index industry researcher who served as the editor of the academic journal "Index Magazine" for a decade, I see two possible outcomes here. Michael Saylor and others have strongly argued that MicroStrategy is a bona fide operating company with both a robust software business and sophisticated financial engineering around Bitcoin. This argument is logical, and I also agree with its business nature. However, this matter is not set in stone, and I can envision some institutions holding a contrary view. Given the contentious nature of crypto asset treasury reserve companies and MSCI's current intention to remove them, I speculate that there is at least a 75% probability of MicroStrategy being removed from the index.

However, I do not believe that being removed from the index will have a significant impact on its stock. While a $2.8 billion sell-off may seem substantial, based on my years of observing index inclusion and exclusion events, the actual impact is often smaller than expected and will be digested by the market in advance. For example, when MicroStrategy was added to the Nasdaq 100 index in December last year, funds tracking that index needed to buy $2.1 billion of MSTR stock, yet its stock price hardly fluctuated.

I believe the slight drop in MSTR's stock price since October 10th is partly due to the market already factoring in the expectation of being "removed from the index." However, at this stage, its stock price is unlikely to experience significant volatility.

In the long term, MSTR's value depends on its strategic execution effectiveness, not whether index funds are forced to hold its stock.

MicroStrategy's Bitcoin Holdings

Another question is whether MicroStrategy will sell Bitcoin. The logic of the bears' concern is as follows:

· MicroStrategy is removed from the MSCI index;

· Its stock price has plummeted to well below Net Asset Value (NAV);

· Eventually forced to sell Bitcoin.

This logic seems sound, but unfortunately, it doesn't hold up at all. If MSTR's stock price falls below Net Asset Value, it will not trigger selling Bitcoin. You can look up the relevant details and do the math yourself.

MicroStrategy has only two key debt obligations: first, it must pay approximately $800 million in interest annually, and second, when some debt instruments mature, it must be converted or extended.

There is no need to worry about interest payments in the short term. The company currently holds $1.4 billion in cash, enough to easily cover a year and a half of interest.

Likewise, debt conversion is not a near-term issue. The first batch of debt instruments doesn't mature until February 2027, with a scale of only about $1 billion, which is just a drop in the bucket for MicroStrategy, which holds $600 billion in Bitcoin.

If MSTR's stock price continues to decline, will insiders pressure the company to sell Bitcoin? The likelihood is extremely low. Michael Saylor himself controls 42% of the voting shares, and it's hard to find anyone more committed to Bitcoin's long-term value than him. In 2022, when MSTR's stock price was at a discount, he did not sell.

I understand why the shorts are enthusiastic about hyping MicroStrategy's "doomsday" narrative. If MicroStrategy were forced to sell $60 billion in Bitcoin at once, the impact on the entire Bitcoin market would be devastating, equivalent to two years' worth of inflows into a Bitcoin ETF. However, given the absence of debt maturing before 2027 and cash sufficient to cover foreseeable interest expenses, this extreme scenario is impossible. We should also take a more macro view of the current situation: at the time of writing, the price of Bitcoin is around $92,000, down 27% from its all-time high, but still 24% higher than MicroStrategy's average Bitcoin holding cost ($74,436). The so-called "doomsday" is nothing but a baseless rumor.

Conclusion

If you are truly concerned about certain aspects of the crypto industry, there are indeed several points worth noting. For instance, I am slightly worried about the pace of the market structure bill at the congressional level, but as government agencies resume normal operations, I believe the bill's progress will accelerate; I am also concerned that some small-scale, poorly run crypto asset custody companies may fail; at the same time, I anticipate that in 2026 crypto asset custody companies will not significantly increase their Bitcoin holdings, meaning the market will lose an important recent source of demand.

But regarding MicroStrategy:

· There is no need to worry about MSCI's decision on MicroStrategy's stock price, as the actual impact is far smaller than most people expected and has likely already been priced in by the market;

· There is currently no reasonable mechanism in the short term that would force it to sell Bitcoin, and this scenario is unlikely to occur.

A steadfast belief in Bitcoin comes at a cost: when the market experiences volatility, it is essential to remain calm and patient. No one understands this better than Saylor and MicroStrategy, as they are equally aware of the other side of this patience. In the long run, this commitment will ultimately yield substantial rewards.

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