How Strategy Maintains bitcoin-treasury-model">Nasdaq 100 Spot Amid MSCI Index Exclusion Risk

Strategy, the Nasdaq-listed software company and one of the largest corporate holders of Bitcoin, remains included in the Nasdaq 100 Index as of mid-2024 despite facing potential exclusion from MSCI indexes due to its significant cryptocurrency holdings. This situation highlights evolving challenges in how major index providers classify and incorporate companies with digital asset exposure.

What happened

Strategy, formerly known as MicroStrategy, holds over 140,000 bitcoins on its balance sheet while continuing to operate primarily as a software and enterprise analytics company. Its dual identity—as both a technology firm and a major corporate Bitcoin holder—has placed it at the center of index inclusion debates. As of mid-2024, Strategy remains a constituent of the Nasdaq 100 Index, which selects companies based on market capitalization, liquidity, and sector classification, with no explicit restrictions related to cryptocurrency holdings.

In contrast, MSCI, a leading index provider, has publicly signaled a policy shift towards excluding companies with significant direct cryptocurrency holdings from certain indexes. This policy stems from MSCI’s concerns over asset classification and the volatility associated with digital assets. While MSCI’s exact exclusion thresholds or criteria are not fully disclosed, its stance has raised the possibility that Strategy could be removed from some MSCI indexes due to its Bitcoin exposure.

Sources analyzing this situation interpret that Strategy’s market capitalization and liquidity metrics—driven by its core software business—meet Nasdaq’s inclusion standards, enabling its continued presence in the Nasdaq 100. Meanwhile, MSCI’s approach reflects a more conservative or evolving methodology that treats cryptocurrency holdings as a disqualifying factor or at least a complicating element for index inclusion.

This divergence illustrates a broader trend among index providers as they reassess how to handle companies with digital asset exposure. The market is witnessing a bifurcation in index treatment depending on the provider’s philosophy and client demand, with no consensus yet on standard classification.

Why this matters

The case of Strategy underscores significant structural challenges in integrating digital assets into mainstream equity benchmarks. Indexes like the Nasdaq 100, which prioritize traditional financial metrics and sector classification, currently allow companies with substantial cryptocurrency holdings to remain included if their core business meets criteria. This approach supports continuity and reflects the company’s primary operations.

Conversely, MSCI’s evolving methodology signals a shift towards stricter asset classification, potentially excluding companies whose balance sheets include volatile or unconventional assets like Bitcoin. This has implications for index composition, investor exposure, and the broader acceptance of digital assets within traditional capital markets infrastructure.

For investors and market participants, differing index treatments can lead to discrepancies in benchmark performance, portfolio construction, and tracking error, especially for funds and ETFs that replicate these indexes. The uncertainty around inclusion criteria for crypto-exposed companies also highlights the ongoing challenge of defining the role and classification of digital assets in financial markets.

What remains unclear

Despite publicly available information, several important questions remain unanswered. MSCI’s specific thresholds or criteria for excluding companies with cryptocurrency holdings are not fully disclosed, leaving unclear how close Strategy is to potential exclusion. Additionally, there is no official indication from Nasdaq on whether its methodology might evolve if Strategy’s Bitcoin holdings increase further or if other companies adopt similar strategies.

Another gap exists regarding how ETF issuers that track Nasdaq 100 or MSCI indexes respond operationally to these inclusion or exclusion decisions, as public disclosures do not typically detail adjustments related to index methodology changes. Furthermore, there is a lack of comprehensive data on the impact of these divergent index treatments on investor portfolios, market liquidity, and benchmark tracking error.

Finally, the broader market consensus on digital asset classification within equity benchmarks remains unsettled, with no clear standard emerging across index providers or regulatory frameworks.

What to watch next

Any updates or clarifications from MSCI regarding the precise criteria or thresholds triggering exclusion of companies with cryptocurrency exposure.
Potential announcements or revisions from Nasdaq concerning its index inclusion methodology, especially if Strategy’s Bitcoin holdings grow or if other firms follow its model.
Disclosures or commentary from ETF issuers and index fund managers on how they manage holdings in companies like Strategy amid diverging index treatments.
Regulatory guidance or industry standards development around digital asset classification in financial benchmarks.
Market data revealing the impact of these inclusion/exclusion dynamics on investor portfolios, benchmark performance, and tracking error.

Strategy’s continued presence in the Nasdaq 100 despite MSCI’s exclusion risk highlights an unresolved tension in market benchmarks over how to treat digital asset exposure. While Nasdaq’s approach currently favors core business operations, MSCI’s stance reflects increasing caution. The absence of full transparency on criteria and the lack of consensus in the industry mean this issue will remain a focal point for investors, index providers, and regulators as digital assets become more mainstream.

Source: https://bitcoinist.com/michael-saylors-strategy-holds-place-in-nasdaq-100/. This article is based on verified research material available at the time of writing. Where information is limited or unavailable, this is stated explicitly.