Bitcoin volatility and Strategy’s MSCI Risk: Who’s really driving the market?

Strategy (formerly MicroStrategy) has taken center stage in Bitcoin’s narrative, primarily due its dual role as a publicly traded company and as the trailblazing corporate Bitcoin holder. 

With Bitcoin officially in a bear market, having fallen by more than 20% from its recent peak, and Strategy sporting billions of dollars in Bitcoin on its balance sheet, every move by the company attracts attention from retail, institutional funds and global index providers like MSCI.

With the company’s stock down more than 60% since its high in mid-July, the volatility has sparked two sharply different narratives about the company’s strategy and its potential effect on Bitcoin.

Position 1: Strategy as a ‘leveraged Bitcoin trade’

Many now see Strategy primarily as a leveraged Bitcoin proxy, rather than a traditional operating company, chiefly because of its:

• Balance sheet concentration – Over 50% of Strategy’s assets are held in Bitcoin. The company’s market behavior often correlates strongly with Bitcoin’s price, giving the appearance of a ‘digital treasury fund’ rather than an operational business.
• Index risk – MSCI is reviewing how to classify companies with majority digital asset holdings. If Strategy were classified as a ‘fund-like’ entity, index funds tracking MSCI indices could be forced to sell their shares, creating downward pressure on the stock and indirectly on Bitcoin.
• Institutional behavior – Large banks, including JP Morgan, have highlighted these MSCI-related risks. Some market participants interpret this as an opportunity for institutions to trigger panic selling and accumulate MSTR at lower prices.

If forced-selling occurs, Strategy’s liquidation could ripple through the crypto markets. BTC often reacts sharply to MSTR weakness, amplifying retail panic and driving price declines.

Position 2: Strategy as a diversified operating company

CEO Michael Saylor and his supporters instead argue that Strategy is fundamentally an operating software business with an innovative treasury strategy and not a passive Bitcoin holding entity, because:

• Operating revenue and products – Strategy has a $500 million software business with active product development. Continued development of new digital credit instruments highlights its ongoing financial innovation.
• MSCI Misinterpretation – The MSCI consultation is broad and non-binding. It applies to all companies with high crypto holdings, not specifically MSTR. Any potential index removal would only take effect from February 2026, giving the company time to adjust.

Saylor addressed market concerns directly on X:

‘Strategy is not a fund, not a trust, and not a holding company. We’re a publicly traded operating company with a $500 million software business and a unique treasury strategy that uses Bitcoin as productive capital…

Funds and trusts passively hold assets. Holding companies sit on investments. We create, structure, issue, and operate. Our team is building a new kind of enterprise — a Bitcoin-backed structured finance company with the ability to innovate in both capital markets and software.

Index classification doesn’t define us.’

The CEO is emphatic. He views Strategy as primarily an operating and innovative financial business and not a passive vehicle, with its Bitcoin strategy actively managed.

MSCI Bitcoin risks

MSCI is a force in global finance and is responsible many of the world’s most widely followed stock market indexes, which serve as the backbone of many ETFs and mutual funds, which remain essential tools for global asset allocation. Beyond indexes, MSCI provides risk and portfolio analytics that major institutions rely on to measure factor exposures, volatility, correlations, stress scenarios, and country or sector risks. 

The company also assigns ESG ratings, scoring firms on environmental impact, social practices and corporate governance. These scores strongly influence where hundreds of billions of dollars of institutional capital flows, which companies are included in global indexes and how executives behave to avoid exclusion. 

In other words, index inclusion (or not) is significant. And Strategy’s key structural risk now stems from the possibility of MSCI reclassifying its stock. 

The process is already underway, with the consultation phase closing on 31 December 2025, and MSCI expected to announce its final decision by 15 January 2026. Any implementation would then follow in February 2026. 

A positive outcome, in which MSTR remains in MSCI indices, would preserve access to index fund capital, sustaining its feedback loop and potentially boosting Bitcoin as the company and its many copycats continue large-scale purchases and investor confidence grows. Conversely, forced removal from MSCI indices could trigger significant selling, disrupt the feedback loop, depress MSTR’s share price and possibly compel BTC sales.

Importantly, MSCI retains the prerogative to classify Strategy as a BTC proxy and not within the purpose of equity indices. This will, to some extent, be a subjective decision.

The Strategy reflexive feedback loop

For context (and this is a simplified version), Strategy’s business model includes a unique feedback loop linking the capital markets and Bitcoin:

1. Capital raising – Strategy issues new stock or convertible debt to raise funds.
2. Bitcoin purchases – The company uses the raised capital to buy more Bitcoin on the open market, increasing BTC demand.
3. NAV and stock appreciation – As the BTC price rises, Strategy’s Bitcoin holdings increase in value, boosting net asset value (NAV). Investors bid up MSTR shares based on this increased NAV.
4. Cycle continuation – Buoyed by premium valuation, MicroStrategy can issue more equity or debt, fueling further Bitcoin purchases.

The cycle repeats as long as market sentiment remains bullish on Bitcoin, and can drive both Bitcoin and Strategy stock higher, creating a powerful momentum loop. Investors gain synthetic exposure to Bitcoin, with the premium valuation is justified by ongoing capital raises and price appreciation.

However, investors should also consider what might happen in a sustained Bitcoin bear market: a drop in BTC reduces the value of holdings and the MSTR NAV, hampering its stock price and capital raising ability. You might see obligations from convertible debt or loan notes forcing Bitcoin sales, sending the flywheel into reverse.

This means that Strategy investors may simply be relying on continued Bitcoin appreciation, Saylor’s capital-raising capability and the absence of prolonged bear markets.

You can see why the MSCI decision is so important.

JP Morgan and where next

Some speculate that JP Morgan may be spreading fear, uncertainty and doubt (FUD) to influence market sentiment. However, there is currently no public proof of a JP Morgan short position in Strategy. 

Regardless, retail traders could in theory respond with a GME-style short squeeze. This is being actively suggested on social media, though traders should be aware that trading purely on social media sentiment is high risk and can easily go wrong.

For objective Bitcoins traders looking to the short-term market reaction, the asset may remain volatile if MSCI-related fears escalate or if Strategy’s reflexive feedback loop dynamics turn negative. The weekly RSI at 33 appears oversold and does suggest potential for rebounds, but there is inarguably heightened risk.

In the medium term, MSCI’s January 2026 decision could create catalysts for either panic or confidence in MSTR, directly affecting Bitcoin’s price momentum. If positive, continued corporate adoption and new ETF inflows may see new highs; if negative, this could become a new headwind.

As a reminder, Strategy is only one part of the wider Bitcoin story. Whether a December rate cut comes or not is arguably just as important, with the Federal Reserve’s Powell and Williams hawkish and dovish respectively, while the unwinding of the Japanese carry trade remains a global Sword of Damocles.

While Saylor has influence, Strategy is a small part of a much larger story.

How to buy crypto in 5 steps

Looking to buy crypto online? We make it as simple as possible to start:

1. Choose a trusted crypto platform – select a reputable exchange like Crypto.com with strong security and positive customer reviews.
2. Create an account – sign up with your email, complete KYC verification, and set up two-factor authentication.
3. Deposit funds – add money using a bank transfer, debit/credit card, or other supported payment methods.
4. Purchase crypto – search for your preferred crypto on the platform and place a buy order.
5. Secure your crypto – either let us handle the storage or transfer your crypto to a personal wallet for peace of mind.

Important Information: This is informational content sponsored by Crypto.com and should not be considered as investment advice. Trading cryptocurrencies carries risks, such as price volatility and market risks. Before deciding to trade cryptocurrencies, consider your risk appetite. Staking rewards, fee reduction, and other benefits referenced in this article may be subject to eligibility requirements, token holdings, and may change at the discretion of Crypto.com.