The Impact of MSTR Removal on BTC

The impact of MSTR being delisted has been discussed before, but I see some readers still don't fully understand, so I’ll talk about it again today.

If MSTR is removed from MSCI, the effect on Bitcoin will be multifaceted, and it’s not as simple as MSTR selling off its Bitcoin holdings.

First, it will declare the bankruptcy of the DAT narrative.

Bitcoin’s rise in the second and third quarters of last year was mainly driven by the continuous DAT buying momentum brought about by the flourishing DAT narrative. The reason so many DATs appeared was due to MSTR’s successful demonstration effect.

MSTR was included in multiple indices such as MSCI and the Nasdaq 100, which provided significant liquidity premiums, and based on this liquidity premium, a coin-stock linkage flywheel was created, causing stock prices and market capitalization to rise steadily. This is what led to the peak popularity of the DAT narrative this year.

Once MSTR is kicked out of MSCI, its liquidity premium will disappear, the coin-stock linkage flywheel will stall, and the DAT narrative will no longer be sustainable. DAT buying momentum will also largely vanish.

Second, it will lead to a vicious cycle in coin-stock prices.

The delisting of MSTR will cause approximately $2.8 billion in passive selling pressure and liquidity deterioration, leading to a continued decline in MSTR’s price. The falling MSTR price will worsen market sentiment for Bitcoin, causing Bitcoin to decline. The decline in Bitcoin will, in turn, cause MSTR to fall further until MSTR experiences a severe discount.

Finally, DAT may be forced to sell Bitcoin.

After the DAT narrative collapses, DAT companies are likely to experience widespread stock price discounts, making it difficult to secure further financing. If their operating cash flows from other businesses cannot cover operational costs, the companies will face operational difficulties. Some DATs that bought Bitcoin with debt may even face bankruptcy.

In such cases, selling Bitcoin becomes a natural choice, and DAT will transform from a bullish engine into a bearish accelerator.

Currently, we are still in the early stages of a bear market, so this situation is not yet obvious. As the deep bear phase approaches, this scenario will become more and more common.