JPMorgan: MSCI Temporarily Does Not Remove MicroStrategy, Cryptocurrency ETF Shows Signs of Bottoming Out and Rebound

JPMorgan analyst report indicates that the de-risking phase in cryptocurrencies may have ended. In January, Bitcoin and Ethereum ETF capital flows bottomed out and rebounded, while perpetual contracts and CME futures show easing selling pressure. MSCI has not ruled out providing relief for crypto companies like MicroStrategy. The recent adjustment was mainly due to MSCI removing MicroStrategy in October, which worsened illiquidity. It stabilized in January.

MSCI Removal Sparks De-risking Wave

JPMorgan analysts state that following December’s capital outflows, the capital flows into crypto ETFs this month show signs of stability, suggesting that the recent de-risking phase in cryptocurrencies may be over. They note that the recent market correction was primarily due to investors reducing risk exposure after MSCI announced in October, rather than due to deteriorating market liquidity.

In a report on Wednesday, JPMorgan analysts wrote that despite stock ETFs experiencing the strongest monthly inflows ever, totaling $235 billion globally, crypto ETFs still saw outflows in December. This stark contrast indicates that while traditional stock markets attracted record capital, the crypto market was bleeding, showing investors are actively reducing crypto exposure.

MSCI announced on October 10 that it would exclude MicroStrategy (MSTR) from its global equity index, triggering a chain reaction. MicroStrategy is the largest publicly listed Bitcoin holder, with over 400,000 BTC. Its removal means passive funds tracking MSCI indices must sell MSTR shares, further dragging down the entire crypto sector.

Analysts believe that MSCI’s recent decision not to exclude Bitcoin and crypto financial companies from its global equity benchmarks in the February 2026 index review could further solidify this stable situation. They say that although MSCI has indicated a broader review of such companies’ treatment in the future, this decision at least provides a “temporary relief” for companies like Strategy. This temporary relief removes the risk of further exclusions in the short term and stabilizes investor confidence.

Four Key Indicators of Crypto ETF Bottoming and Rebound

Capital Flow Data: January saw net inflows into Bitcoin and Ethereum ETFs, reversing December’s outflows

Perpetual Contract Market: Open interest stabilized, funding rates rebounded from negative levels, bulls re-entered

CME Futures Positions: Institutional holdings shifted from reduction to increase, indicating renewed confidence among professional investors

Liquidity Indicators: Trading volume’s impact on prices did not worsen, confirming that the sell-off was not due to a liquidity crisis

Liquidity Not Deteriorating, Panic Selling Excluded

Analysts also examined whether liquidity deterioration played a role in the recent price correction in cryptocurrencies, stating that “it is very unlikely.” They point out that market breadth and liquidity indicators, including CME Bitcoin futures and Bitcoin ETF trading volume impacts on prices, show little evidence that liquidity issues were the main cause of the sell-off.

This judgment is extremely important. Liquidity deterioration is usually accompanied by panic selling, characterized by disappearing buy orders, slippage surges, and disorderly price declines. However, the December correction did not exhibit these features; price declines were relatively orderly, trading volume decreased but did not collapse, and order book depth remained stable. This “orderly correction” suggests the decline was driven by active risk reduction rather than panic-driven sell-off.

Analysts say, “We believe that the main driver of the crypto market correction was the de-risking triggered by MSCI’s announcement on October 10 to exclude MicroStrategy from the index. The good news is that January’s crypto capital flows and holdings indicators show signs of stabilization and bottoming, indicating that previous selling by investors has largely ceased.”

This conclusion is significant for Bitcoin’s rebound today. If de-risking has indeed ended, it means passive sell pressure has disappeared, allowing the market to refocus on fundamentals and technicals. However, JPMorgan also warns that true institutional investors have not yet entered in large numbers; the current stabilization mainly results from previous sellers halting their sales, not from new buying interest.

Three Catalysts Needed for the Next Bull Run

Nevertheless, several indicators this month suggest the crypto market is stabilizing. Analysts say that Bitcoin and Ethereum ETF capital flow data show early signs of bottoming, and perpetual contract and CME Bitcoin futures position indicators also suggest that selling pressure may be easing.

JPMorgan points out that the next wave of significant gains will require new catalysts. First, progress in crypto legislation—if the US Congress passes the Market Structure Bill, it will attract more institutional capital. Second, the Fed’s rate cut expectations materialize, and a low-interest-rate environment will boost the appeal of non-yielding assets like Bitcoin. Third, genuine institutional investors entering the market—pensions, sovereign funds, and other long-term capital allocations—will provide sustained buying.

The analysts write, “Overall, all these indicators suggest that the trend of retail and institutional investors reducing crypto holdings in late 2024 may be over.” This cautious phrasing of “may be over” indicates that JPMorgan sees signs of stabilization but has not yet confirmed a trend reversal. More data is needed to verify this judgment.