Billion-dollar outflows threaten crypto market if MSCI excludes treasuries

The cryptocurrency market has been under constant pressure since October, a period that has significantly affected overall sentiment. This fragile environment is likely to worsen if Morgan Stanley Capital International (MSCI) goes ahead with its proposal to remove cryptocurrency companies from its benchmarks. Such a move would force funds tracking the MSCI indexes to adjust their portfolios, leading to mandatory sales of these companies. Analysts estimate that this could trigger cryptocurrency sales of up to $15 billion, adding to the tension in the market.

Potential impact of the MSCI proposal on the market

A coalition opposing the planned changes to MSCI’s index, Bitcoin For Corporations, has warned that the exclusion of cryptocurrency trading could lead to significant outflows from the sector, projecting potential sales of $10 billion to $15 billion. Their ranking is based on a preliminary verified list of 39 companies that collectively hold an unadjusted market capitalization of $113 billion.

Of this group, there are 18 existing MSCI members to be removed, representing $98 billion in outstanding adjusted value, while 21 non-members with $15 billion in outstanding adjusted value face permanent exclusion.

The group highlighted JPMorgan’s analysis which suggested that Strategy could suffer outflows of around $2.8 billion if it were removed from the MSCI indices. The Strategy’s total market capitalization is estimated at $50 billion to $56 billion, with approximately $9 billion held by passive index-tracking funds. The company alone accounts for nearly three-quarters (74.5%) of the total adjusted net worth on the preliminary list, or $84.1 billion of the $113 billion. Combined, the potential outflows from all affected companies could reach around $11.6 billion, highlighting the possibility of significant stress in the cryptocurrency market.

Industry leaders rallied against the proposal

Several prominent figures in the crypto industry have expressed support for MSCI’s review. Michael Saylor, executive chairman of Strategy, and Simon Gerovich, president of Metaplanet, are among those backing the Bitcoin For Corporations petition, which has garnered 1,268 signatures, reflecting widespread concern across the industry.

The group criticized MSCI’s use of a 50% threshold of total assets, which could exclude companies simply because they hold bitcoin or other digital assets. They argued that the proposed method misrepresents how these companies actually operate. Rather than passive investment vehicles, they manage their operations completely, including managing employees and clients, while maintaining proper accounting. Viewing them as existing only to hold digital assets creates a distorted picture of their business reality.

Market reaction to changes proposed by MSCI

In October, MSCI sought investor views on whether companies holding the majority of their assets in cryptocurrencies should remain in its benchmarks. Since these indexes influence passive investment funds, their inclusion or removal can significantly affect a company’s ability to attract financing. MSCI is expected to announce its final decision by January 15, with any approved changes planned to be implemented during the index review in February 2026.

Many key industry players expressed opposition to the proposal. Nasdaq-listed Strive called on MSCI to let market forces decide whether companies holding bitcoins should remain in passive investment portfolios, stressing that uniform treatment of all asset classes is necessary to maintain the credibility of the stock index. Strategy, the largest company holding bitcoin on its balance sheet, also raised objections, noting that the proposal could be biased against the cryptocurrency as an asset class and contradict MSCI’s neutral role as a standards-setting organization.

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The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.