Nasdaq-listed Strive, the 14th-largest publicly-listed Bitcoin treasury firm, has urged MSCI to reconsider its proposed exclusion of major Bitcoin holding companies from its indexes. 

In a letter to MSCI’s chairman and CEO, Henry Fernandez, Strive argued that excluding companies whose digital asset holdings comprise more than 50% of total assets would reduce passive investors’ exposure to growth sectors and would fail to capture companies it intends to.

Losing a spot in MSCI indexes could be a significant blow to digital asset treasury firms. JPMorgan analysts had earlier warned that Strategy, a Bitcoin treasury firm listed in the MSCI World Index, could lose $2.8 billion if MSCI moves ahead with the proposal. 

Strategy chair Michael Saylor has since stated that the company is in communication with the index provider regarding the issue. 

Large Bitcoin holders are at the forefront of AI: Strive CEO

Strive CEO Matt Cole argued that major Bitcoin miners such as MARA Holdings, Riot Platforms and Hut 8 — all potential firms in the exclusion list — are rapidly diversifying their data centers to provide power and infrastructure for AI computing. 

Source: Matt Cole

“Many analysts argue that the AI race is increasingly limited by access to power, not semiconductors. Bitcoin miners are ideally positioned to meet this rising demand,” he said. 

“But even as AI revenue comes in, their Bitcoin will remain, and your exclusion would too, curtailing client participation in the fastest-growing part of the global economy.”

Bitcoin structured finance is growing

The exclusion would also cut off companies like Strategy and Metaplanet, which offer investors a similar product to a variety of structured notes linked to Bitcoin’s returns from the likes of JP Morgan, Morgan Stanley and Goldman Sachs, argued Cole. 

“Bitcoin structured finance is as real a business for us as it is for JPMorgan. In fact, we, like other Bitcoin companies, have been open about our intent to make this our core vertical. It would be asymmetric for us to compete against traditional financiers, weighed down by a higher cost of capital from passive index providers’ penalties on the very Bitcoin enabling our offerings.”

A 50% Bitcoin threshold is unworkable

Cole said the proposal is unlikely to be workable in practice, as tying the inclusion of the index to a volatile asset would mean companies would “flicker” in and out of the index, raising management costs and tracking errors. 

There’s also the issue of measuring when digital asset holdings reach 50% as companies gain exposure to digital assets through various instruments. 

Related: Strategy’s Michael Saylor on potential MSCI exclusion: ‘We’re engaging’

“The question is not theoretical. Trump Media & Technology Group Corp., holder of the tenth-largest public Bitcoin treasury, did not appear on your preliminary exclusion list because its spot holdings comprised just under 50% of total assets,” said Cole.

“Yet Trump Media is not there simply because it is the first large treasury to seek substantial digital asset exposure through derivatives and ETFs.” 

Instead of a broad-stroke exclusion, Strive has urged the MSCI to consider creating an “ex-digital asset treasury” version for its existing indexes. 

“Asset owners that wish to avoid these companies could select those benchmarks, while others could continue to use the standard indices that most closely represent the full investable equity universe.”

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