Holding the line against the wind! Bitcoin holding giants Strategy successfully remain in the Nasdaq 100, MSCI's big test is approaching

In the latest round of index component adjustments, the Bitcoin holdings giant Strategy successfully retained its seat in the NASDAQ 100 index. This marks the second year that the company has entered this mainstream tech stock index with its “Bitcoin Treasury” strategy. However, its business model of using company stock as a “Bitcoin leverage investment tool” is increasingly scrutinized. Global leading index provider MSCI has explicitly stated that it is evaluating whether to remove Strategy and similar digital asset holding companies from its benchmark indices, with a final decision to be announced in January next year. This “survival” and the potential “exclusion” not only concern Strategy’s stock price and billion-dollar market cap but also impact over $1.5 billion in passive index fund flows, becoming an important indicator of how traditional financial markets accept crypto-native companies.

NASDAQ component adjustment finalized, Strategy narrowly survives

Annual index component rebalancing is akin to a silent “midterm exam” for listed companies, directly affecting their standing and liquidity in the eyes of institutional investors. In the latest announced list, Strategy’s name was not among those removed, meaning this unconventional company will continue to be part of the NASDAQ 100 tech stock index. For Strategy and its founder Michael Saylor, this marks a crucial milestone victory.

In this adjustment, six well-known companies—Biogen, CDW, GlobalFoundries, Lululemon Athletica, On Semiconductor, and Trade Desk—were removed. They were replaced by newcomers such as Alnylam Pharmaceuticals, Ferrovial, Insmed, Monolithic Power Systems, Seagate Technology, and Western Digital. Strategy’s “survival” reflects that index compilers—at least for now—still classify and accept it as a compliant tech company. Looking back, Strategy was first included in the index in December last year, when its stock surged due to Bitcoin’s rebound, and market saw it as a symbolic fusion of crypto concepts with traditional tech indices. Its continued inclusion, achieved amid market turbulence, further cements this symbolic significance.

However, the “pass” does not mean complete peace of mind. The dust from this adjustment has only settled one part of the challenge. The more daunting threat comes from another influential “examiner”—MSCI. Nasdaq’s temporary approval cannot offset increasing market doubts about the fundamental nature of Strategy’s business model, casting uncertainty over MSCI’s upcoming review. The battle to retain its position is far from over.

Key information on the latest NASDAQ 100 adjustment

Successful retainers: Strategy (MSTR), included since December 2022, classified under technology.

Companies removed: Biogen (BIIB), CDW Corporation (CDW), Globalfoundries (GFS), Lululemon Athletica (LULU), On Semiconductor (ON), Trade Desk (TTD).

Newly included companies: Alnylam Pharmaceuticals (ALNY), Ferrovial (FERF), Insmed (INSM), Monolithic Power Systems (MPWR), Seagate Technology (STX), Western Digital (WDC).

Effective date: December 22, 2024.

Index definition: Tracks the largest 100 non-financial companies listed on NASDAQ.

Business model under intense scrutiny: Tech company or Bitcoin fund?

Strategy’s ability to remain in the NASDAQ 100 largely hinges on its origins as a “tech company” (initially as enterprise software firm MicroStrategy) and the index classification rules. But with its strategic transformation, a fundamental question has emerged: Is Strategy today a tech company, or a high-leverage special purpose investment vehicle (SPV) betting on Bitcoin’s price? This “identity crisis” is at the core of all regulatory and market scrutiny it faces.

Since its transformation in 2020, Strategy’s core business shifted from selling software to continuously acquiring and holding Bitcoin. To date, it holds over 200,000 BTC, worth billions of dollars, with its market capitalization and stock price movement highly correlated with Bitcoin’s price. Many market analysts note that this model makes it resemble a closed-end Bitcoin fund without management fees, with its stock acting as a financial derivative that allows investors to indirectly hold and amplify Bitcoin exposure. When a company’s core value is nearly entirely anchored to a highly volatile alternative asset, is it still reasonable and representative to include it alongside traditional tech giants like Apple or Microsoft in the same benchmark index?

Such questions are not unfounded. This year, Strategy’s stock has fallen about 36% from its all-time high, with a retracement of 65%. Its volatility far exceeds most tech stocks and almost moves in tandem with Bitcoin. This high Beta characteristic causes passive investors tracking the NASDAQ 100 to inadvertently amplify their crypto exposure. That is precisely MSCI’s concern: including such companies in broad-based indices might distort the risk-return profile and mislead investors relying on index-based asset allocation.

MSCI review imminent, hundreds of billions of passive funds face choices

If Nasdaq’s adjustment is a yearly test, then MSCI’s review is a potentially life-changing “final exam.” As a cornerstone for global institutional asset allocation, changes in MSCI’s index composition directly influence trillions of dollars of capital flows. MSCI has publicly announced that it is evaluating whether to remove Strategy and similar digital asset holding companies from its global investable market indices, with a decision expected in January 2025.

The impact of such a potential removal would be substantial. Industry analysis firm Bitwise estimates that if MSCI excludes Strategy, over $1.5 billion in passive management funds could be forced to sell their holdings. These funds include ETFs and institutional portfolios tracking MSCI indices. Their rebalancing actions are not based on subjective company outlooks but strictly follow index rules. Once triggered, this could trigger a new downward pressure on Strategy’s already underperforming stock.

Strategy has clearly recognized the severity of the issue and has formally filed objections with MSCI. Its main argument is that, based on clear rules (e.g., market cap, liquidity), including the company and then subjectively removing it due to its business nature is unfair and would harm investors seeking exposure to Bitcoin through traditional stocks. Bitwise also supports this view, emphasizing that index construction should follow transparent, consistent rules rather than value judgments on specific business models. This debate essentially reflects a deeper conflict over how traditional financial classification systems define and accommodate crypto-native business models.

The “double-edged sword” of going public in crypto

The controversy over Strategy’s index seat serves as a vivid lesson for all crypto-related companies aspiring to enter mainstream capital markets. Going public and joining major indices can confer unparalleled brand recognition, liquidity, and financing channels—factors that helped Strategy achieve early success. But it also entails accepting stricter regulatory and compliance scrutiny.

This “double-edged sword” manifests on multiple levels. First, the high correlation between stock price and Bitcoin’s price can be a double-edged sword. In bull markets, it can bring valuation premiums and attention far beyond traditional businesses; in bear or volatile markets, it amplifies downward pressure and raises questions about operational independence and long-term viability. Second, regulatory and compliance risks are magnified. As a listed company, its actions and holdings must be publicly disclosed, and any regulatory policy changes related to Bitcoin immediately impact its stock. Finally, the index qualification risk highlighted here depends on whether it can be accepted and maintained by mainstream indices, which is uncertain.

For the market, Strategy’s fate has become an important barometer. If ultimately excluded by MSCI and other major indices, it could signal that traditional finance is moving toward marginalizing or reclassifying such “single-asset theme” companies. Conversely, if it passes the review and maintains its position, it would signal a significant institutional acceptance of crypto companies within traditional capital markets. Regardless of the outcome, this process is reshaping the boundaries of what constitutes a “tech company” or “investment vehicle” in the era of digital assets.