Strive Urges MSCI to Rethink Bitcoin Treasury Index Exclusion
- Strive, a significant Bitcoin treasury firm, has formally requested MSCI to reconsider its proposed exclusion of companies with over 50% of assets in digital assets from its indexes.
- The firm argues this exclusion would limit passive investors’ access to growth sectors and prevent index tracking of relevant companies.
- Major Bitcoin miners diversifying into AI infrastructure, like MARA, Riot, and Hut 8, are highlighted as examples of companies unfairly impacted.
- Strive suggests an alternative approach: creating an ex-digital asset treasury version of existing indexes.
- The current 50% threshold is deemed unworkable due to digital asset price volatility and measurement complexities.
MSCI Index Exclusion Could Impact Bitcoin Treasury Firms
Nasdaq-listed Strive, a prominent Bitcoin treasury firm, has formally petitioned MSCI to reconsider its proposed policy that would exclude companies whose digital asset holdings surpass 50% of their total assets from various MSCI indexes. In a letter addressed to MSCI’s leadership, Strive asserted that such an exclusion would disadvantage passive investors by limiting their exposure to dynamic growth sectors and could prevent the index provider from accurately capturing the full spectrum of companies operating in nascent industries.
The potential removal from MSCI indexes poses a significant financial risk to firms like Strive. Analysts previously warned that a company integrated into the MSCI World Index could face substantial divestment if the proposal moves forward. This highlights the critical influence of index inclusion on the market valuation and accessibility of publicly traded digital asset-focused companies.
⚡ Insight: Index providers play a crucial role in shaping investment flows. A company’s inclusion or exclusion from major indices like MSCI can directly impact its stock liquidity, institutional investor interest, and overall market perception.
Strive CEO: Bitcoin Holders are Key to AI Infrastructure Growth
Strive CEO Matt Cole emphasized that major Bitcoin miners are increasingly pivoting towards supporting the artificial intelligence (AI) boom. Companies such as MARA Holdings, Riot Platforms, and Hut 8, which are potentially subject to MSCI’s exclusion, are actively retooling their data centers to provide the necessary power and infrastructure for AI computing. This strategic diversification places them at the forefront of meeting the growing demand for computational resources.
Cole argued that this dual role—holding Bitcoin while supporting AI—positions these companies uniquely. 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 stated eloquently in his correspondence. He further elaborated that even as these companies generate revenue from AI services, their existing Bitcoin reserves would remain, and exclusion from indexes would unfairly curtail investor participation in a rapidly expanding segment of the global economy.
Advancing Bitcoin Structured Finance
Cole also pointed out that the proposed exclusion would impact companies offering innovative financial products. Firms like Strive and Metaplanet provide investors with structured financial products linked to Bitcoin’s performance, similar to offerings from traditional finance giants like J.P. Morgan, Morgan Stanley, and Goldman Sachs. Excluding these digital asset-focused companies would create an uneven playing field.
“Bitcoin structured finance is as real a business for us as it is for J.P. Morgan. In fact, we, like other Bitcoin companies, have been open about our intent to make this our core vertical, Cole explained. He highlighted the inherent disadvantage they face when competing against traditional financiers, especially when index providers might penalize companies holding Bitcoin, which is central to their innovative financial offerings.
💡 Did You Know? Structured finance products allow investors to gain exposure to an asset’s performance through customized investment vehicles, often offering defined risk-return profiles. Bitcoin’s volatility makes it an interesting underlying asset for such innovations.
The Challenge of a 50% Bitcoin Threshold
The practicality of a strict 50% threshold for Bitcoin holdings within index inclusion criteria was heavily questioned by Strive. Cole argued that the inherent volatility of digital assets means companies could frequently fluctuate above and below this threshold, leading to increased management costs and tracking errors for index funds. This constant flux would make reliable index membership difficult to maintain.
Furthermore, accurately measuring when a company’s digital asset holdings reach the 50% mark presents significant complexities, especially when exposure is gained through various financial instruments like derivatives and exchange-traded funds (ETFs). The methodology for such continuous valuation could prove to be a substantial hurdle.
“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,” Cole noted. This example underscores the fine line and potential arbitrariness of a fixed percentage-based exclusion when various methods of acquiring asset exposure exist.
Instead of a blanket exclusion, Strive proposed that MSCI consider developing an ex-digital asset treasury variant of its existing indexes. This approach would allow asset owners with specific mandates to opt-out of these companies, while others could continue to utilize standard indexes that comprehensively reflect the investable equity universe without artificial constraints.
Frequently Asked Questions about Bitcoin Treasury Index Inclusion
What is the primary concern Strive has with MSCI’s proposed exclusion?
Strive’s main concern is that MSCI’s proposed exclusion of companies with over 50% of assets in digital assets would limit passive investors’ ability to access growth sectors and misrepresent the evolving corporate landscape, particularly in areas like AI infrastructure.
Why are Bitcoin miners relevant to the AI sector?
Major Bitcoin miners are increasingly diversifying their operations by repurposing their significant data center infrastructure and power resources to support the energy-intensive demands of artificial intelligence computing, positioning them as key players in the AI’s growth.
What alternative solution does Strive propose to MSCI?
Strive suggests that MSCI create an ex-digital asset treasury version of its existing indexes. This would allow investors to choose benchmarks that align with their specific preferences regarding digital asset exposure.
What are the practical challenges of the 50% asset threshold?
The 50% threshold is considered unworkable due to the price volatility of digital assets like Bitcoin, which can cause companies to frequently enter and exit index eligibility. Additionally, measuring digital asset exposure through various instruments like derivatives and ETFs adds complexity.
Conclusion on MSCI’s Proposed Index Changes
Strive’s appeal to MSCI highlights a crucial juncture for publicly traded digital asset companies. The firm effectively argues that a rigid exclusion policy based on asset allocation could overlook significant industry shifts, particularly the strategic integrations of Bitcoin miners into the burgeoning AI sector. By providing a well-reasoned argument and proposing a nuanced alternative, Strive aims to foster a more inclusive and representative market.
The debate underscores the evolving nature of corporate finance and the challenges index providers face in adapting to new asset classes and business models. Strive’s proactive engagement signifies the growing influence of Bitcoin treasury firms and their determination to ensure fair representation within traditional financial markets, ultimately benefiting a broader range of investors seeking exposure to innovation.
