Analysis of MSCI’s Decision Regarding Digital Asset Treasury Companies
The recent decision by MSCI Inc. to maintain the inclusion of Digital Asset Treasury Companies (DATCOs) in its global indices, as announced on January 6, 2026, has averted an impending forced sell-off of crypto-linked equities. Nevertheless, this reprieve is accompanied by significant structural implications that fundamentally recalibrate the economics associated with the “Bitcoin Treasury” trade.
MSCI’s announcement explicitly stated:
“For the time being, the current index treatment of DATCOs identified in the preliminary list published by MSCI of companies whose digital asset holdings represent 50% or more of their total assets will remain unchanged.”
Impact on Equity Issuance and Passive Investment Dynamics
In conjunction with this measure, MSCI has implemented a technical freeze on share counts for these entities, which includes a suspension of increases to the Number of Shares (NOS), Foreign Inclusion Factor (FIF), or Domestic Inclusion Factor (DIF). This effectively severs the historical linkage between new equity issuance and automatic passive buying mechanisms. As articulated in MSCI’s announcement:
“MSCI will defer any additions or size-segment migrations for all securities included in the preliminary list.”
While the immediate aftermath saw a notable surge of over 6% in Strategy’s stock, reflecting market relief over the elimination of a catastrophic liquidity event, it is imperative to recognize that this newly established status quo dismantles the upside mechanics inherent to the index trade.
The Disruption of Passive Demand Mechanisms
Historically, when firms such as Strategy issued new shares to finance Bitcoin acquisitions, MSCI would adjust the share count accordingly. This adjustment would activate passive funds tracking the index to procure a pro rata portion of new issuances—essentially creating a guaranteed source of demand insulated from price fluctuations. However, under the newly instituted freeze policy, MSCI will disregard any new shares for index calculation purposes.
As a result, even if Strategy were to broaden its float significantly to raise capital, its weight within the index would remain static. Consequently, exchange-traded funds (ETFs) and index funds would no longer be compelled to acquire these new shares. Analysts contend that this paradigm shift necessitates a return to fundamental market dynamics; without benchmark-tracking demand as a safety net, firms like Strategy must now depend on active managers, hedge funds, and retail investors to absorb any supplementary supply.
Quantifying the Liquidity Gap Created by MSCI’s Decision
To fully comprehend the ramifications of this strategic alteration, market analysts are quantifying what has been termed a “liquidity gap.” Bull Theory, a prominent crypto research firm, presented an illustrative scenario involving a treasury company with 200 million outstanding shares—approximately 10% of which are customarily held by passive index trackers. In their model:
– If this company issues an additional 20 million shares for capital infusion,
– Previous index mechanics would have mandated that passive funds purchase 2 million shares at a theoretical price point of $300 each,
– This scenario would have generated an automatic buying pressure amounting to $600 million.
However, under MSCI’s revised framework, Bull Theory noted that this potential influx of automatic demand collapses to zero:
“Strategy now must find private buyers, offer discounts, or raise less money.”
This paradigm poses significant challenges for Strategy and similar firms that have historically relied on passive investment flows. In 2025 alone, Strategy issued over $15 billion in new shares to aggressively acquire Bitcoin; attempting to replicate such issuance in 2026 will now occur without structural support from passive investors. This absence significantly elevates the risk of price corrections during dilution events.
The Emergence of ETFs as Beneficiaries in This New Landscape
MSCI’s decision not only influences DATCOs but simultaneously alters competitive dynamics within the asset management sector. The maturation of US spot Bitcoin ETFs has attracted substantial institutional interest over the past year. This evolution has prompted Morgan Stanley—MSCI’s former parent company—to file for its own Spot Bitcoin ETF.
From this perspective, Strategy finds itself in competition with these fee-bearing Bitcoin ETFs which provide investors with passive exposure through an operating company structure. The freezing of index weighting for DATCOs may diminish their capability to scale efficiently via equity markets. As Strategy faces constraints in raising inexpensive capital due to diminished passive demand:
– Large allocators may pivot their investments from corporate equities toward Spot ETFs,
– Such ETFs do not encounter operational risks associated with corporate structures or exhibit volatility relative to premiums over net asset value (NAV).
This shift in capital allocation stands poised to benefit issuers of spot ETFs—including major Wall Street banks—thus appropriating fees that were previously reflected within equity premiums. By diminishing the “flywheel” effect associated with treasury strategies, MSCI may have inadvertently rebalanced advantages in favor of traditional asset management products.
