- Bitwise opposes MSCI’s plan to remove Strategy from major global market indexes.
- MSCI’s proposed 50% digital asset rule raises concerns over index neutrality.
- Index exclusion could trigger billions in forced selling by passive funds.
Bitwise has publicly criticized MSCI on its proposal of an index rule, which may relegate Strategy to key international indices. The controversy is based on the categorization of organizations with large Bitcoin accounts. The move may affect investor access, passive fund flows, and subsequent treatment of digital asset companies.
Bitwise, a digital asset fund manager, published its stance on December 12. The company reacted to continued consultation by MSCI on index methodology. It was against reform that would recategorize the companies, such as Strategy. Bitwise declared that these moves undermine the intention of market indexes.
Bitwise Calls for Index Neutrality Amid MSCI Review
The company claimed that the indexes had to be based on the market structure, rather than on business preferences. Bitwise claims that the proposal generated by MSCI presents subjective judgment. It cautioned that this would mislead the investors about the market. Bitwise said index neutrality should be the priority.
The controversy comes after MSCI reviewed Digital Asset Treasury companies. These companies have high amounts of digital assets on their balance sheets. The largest corporate Bitcoin holder, Strategy, is placed at the center of the review. This process started in October at MSCI.
MSCI’s 50% Rule Faces Pushback From Bitwise
MSCI is thinking of the implementation of a 50% rule as part of the review. The proposal would eliminate companies whose digital assets comprise at least half of total assets. MSCI considers these companies to be like investment holding companies. This classification has been severely criticized.
Bitwise disagreed with such reasoning. The company indicated that Strategy is a dynamic business, not a passive investment vehicle. It also contended that exchange-traded products could not reproduce the structure of Strategy. Bitwise concluded that Strategy has provided shareholder value in its approach.
Also Read: Strategy Inc. Opposes MSCI’s Plan to Exclude DATs from Key Indexes
The company also questioned investor influence. Bitwise asserted that the offer would limit contact with the leaders of digital assets. Investors with passive funds would no longer have access to a thriving industry, it warned. Bitwise believes such an approach would disadvantage investors.
Strategy Pushes Back as Saylor Calls MSCI Rule Discriminatory
Strategy has taken its own defense. During the consultation period, Chairman Michael Saylor has been directly involved with MSCI. He described the proposed rule as discriminatory. Saylor stated that index standards should be in line with the global market revolution.
Strategy asserts it is an operating company. The company claims that it uses Bitcoin as a means of supporting long-term equity returns. It refutes assertions that its balance sheet characterizes it as a holding entity. Strategy says that innovation does not bring about exclusion.
Other firms have echoed these concerns. The MSCI has been urged by Strive, an investment corporation, to rethink its proposal. Market analysts have also emphasized the potential risks associated with index removal. JPMorgan added that fears of forced selling have already taken place in Strategy stock.
The pressure is still severe because of the impact of MSCI. MSCI indexes follow trillions of dollars worldwide. An elimination would cause forced sales with index funds. Some projections indicate that the asset could sell for billions of dollars.
MSCI is expected to publish the decision on January 15. The result may influence the treatment of digitally heavy companies by the index providers. A positive decision could lead to greater acceptance of digital assets. This exclusion potential would slacken passive investment throughout the industry.
Also Read: Harvard University Buying More Bitcoin Over Gold, Says Matt Hougan Bitwise CIO
