CRYPTO STRUCTURE IN MSCI AND THE TRADITIONAL FINANCIAL WORLD
MSCI’s (Morgan Stanley Capital International) decision regarding Strategy (MicroStrategy) is a product of the “definition” conflict between the traditional financial world and the crypto-focused corporate structure. Instead of completely removing MicroStrategy from the index, MSCI imposed a technical restriction whereby new shares issued via ATM (At-The-Market) would not be included in the index weighting. This decision had several objectives. These objectives will have potential implications for the Bitcoin purchase strategy.
Purpose and Scope
MSCI indices are generally based on companies that produce goods and provide services.However, companies such as MicroStrategy, whose assets consist of more than 50% digital assets, are no longer considered “software companies” in the eyes of MSCI, but rather “investment funds” or “digital asset vaults.“Considering their objectives, we can evaluate them in two points
- Protecting Passive Funds
- Volatility ThresholdWhat do the technical provisions mean in systemic terms?
The new shares the company issued to purchase Bitcoin will not be immediately added to the “public float” or “total weight” in the MSCI index calculation. Furthermore, passive funds (such as MSCI World ETFs) will not be forced to automatically purchase more MicroStrategy shares with each new share issuance.
Do these actions weaken the Bitcoin purchase strategy?
This step does not prohibit MicroStrategy from purchasing Bitcoin, but it may slightly weaken the efficiency of its financing model. This can be observed in three areas.
- Demand Pressure May Decrease
- Market Premium
- Strategic Continuity
SUMMARY
The most critical aspect of this decision—the provision that new shares issued via ATM (at market price) are not included in the index weighting—directly targets MicroStrategy’s Bitcoin accumulation model. Under normal circumstances, when a company issues new shares to the market, MSCI indices include these shares in their weighting calculations, and institutional funds that track this index automatically purchase these new shares to balance their portfolios.
With MSCI’s new restriction, the new shares MicroStrategy issues to buy Bitcoin will no longer be included in the index calculation.
This will eliminate one of Michael Saylor’s most powerful tools: the advantage of “index funds being mandatory buyers.”
The impact of this situation on the Bitcoin purchase strategy is quite critical.
The cycle that the company has been following so far, which is “issue shares, buy Bitcoin with the incoming funds, increase the value of the shares when Bitcoin rises, and issue shares again,” was working very quickly thanks to the guaranteed demand provided by index funds.
With the new rule, there will no longer be “automatic demand” from passive funds for newly issued shares; this means that each new purchase period could put more pressure on the share price.
Ultimately, MSCI is not prohibiting MicroStrategy from buying Bitcoin, but aims to break the domino effect of these purchases on the index, removing the company as a “risk center” for index funds.
This move could slow the company’s future Bitcoin purchase pace and push it toward more traditional borrowing methods, such as bond issuance.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. The views expressed are general in nature and may change with market conditions.
