Strategy Inc. Faces Potential Index Exclusion Crisis

A startling analysis from banking giant JPMorgan has sent shockwaves through investment circles, revealing that Strategy Inc. (formerly MicroStrategy) confronts an existential threat that could trigger massive forced selling. The company's substantial Bitcoin holdings have placed it at risk of removal from major market indices, creating a perfect storm as both its stock value and cryptocurrency prices show significant volatility.

Market strategists at JPMorgan, led by Nikolas Panigirtzoglou, have quantified the potential damage from index exclusion. Their research indicates that removal from the MSCI USA index alone could force approximately $2.8 billion in institutional selling. Should additional benchmarks like the Nasdaq-100 follow suit, the total forced liquidation could reach a staggering $8.8 billion. This represents a severe liquidity shock for shares already trading under substantial pressure.

The timing of this potential crisis compounds existing challenges. Strategy Inc.'s stock recently touched a 52-week low, closing at €148.15 on Friday. Since the beginning of the year, the equity has lost nearly half its value, declining by 49.33 percent.

Regulatory Scrutiny of Digital Asset Holdings

The core issue stems from index providers reevaluating their criteria for companies with significant digital asset exposure. Many benchmarks maintain thresholds requiring that no more than 50% of a company's total assets consist of cryptocurrency. Strategy Inc. now finds itself well above this limit, with Bitcoin representing over 75% of its corporate valuation.

This substantial overweight in digital assets has triggered concerns that major index compilers may remove the company from their tracked benchmarks. Such a decision would automatically force index-tracking funds and ETFs to divest their positions, regardless of individual investment theses.

Should investors sell immediately? Or is it worth buying Strategy?

Erosion of the Strategic Premium

JPMorgan's analysis highlights another critical vulnerability: the rapid erosion of Strategy Inc.'s stock premium relative to its underlying Bitcoin holdings. For years, Michael Saylor's "flywheel" approach—issuing expensive equity to acquire Bitcoin at market prices—generated significant value. However, market participants are now reassessing this premium, with it rapidly approaching parity with the actual cryptocurrency value.

Without this valuation advantage, the company loses its primary mechanism for value creation. Executive Chairman Michael Saylor quickly took to platform X to defend the company's operational software business status, but investor skepticism remains evident. Recent euro-denominated bond issuance has already traded weaker in secondary markets, signaling institutional concern.

Critical Decision Date Approaches

Market attention now focuses on January 15, 2026, when MSCI is expected to announce its decision regarding Strategy Inc.'s index status. While some analysts, including those at TD Cowen, maintain buy ratings and consider current fears exaggerated, the stock faces extreme uncertainty until resolution.

The situation is further complicated by Bitcoin's own price vulnerability, with the cryptocurrency struggling to maintain the $80,000 level. As both the underlying asset and the company's shares face pressure, investors must determine whether Strategy Inc. represents a fundamentally broken business model or a historic buying opportunity in distressed conditions.