Last Friday, the TPP 500 index closed the door to MicroStrategy of Michael Saylor, who rejected his application for inclusion in the world’s most prestigious stock index. Now, as Morgan Chase analysts have pointed out, this is a clear indication that the Commission will not accept that companies that are “in essence bitcoin funds” are disguised as operating enterprises.

In a report to investors on Wednesday, Morgan Chase analysts wrote: “This refusal hit not only MicroStrategy, but also the well-encrypted bank of businesses that had grown rapidly in recent months.” They warned that such a refusal implied that bitcoin that entered the investor ' s portfolio through the door might have reached its limit.

The rejection of MicroStrategy was a critical moment for Bitcoin Treasury. According to Capriole Investments, one third of 172 publicly traded Bitcoin Treasury companies had a share price below their premium. Just last week, Sequans Corporations, the first Bitcoin Treasury company to be exposed to the risk of de-marketing from the New York Stock Exchange, had to resort to a complex reverse stock-sharing programme to stop the risk.

Higher threshold

In theory, MicroStrategy meets all the conditions for joining the standard 500: four consecutive quarters of profitability, sufficient market value and sufficient liquidity. However, for a committee with discretionary powers, the problem is that MicroStrategy is part of the source of capital. The CoinShares analyst Alexander Schmidt told DL News that “most of the company's profits in the last quarter came from non-recurrent revenues from unrealized gains on digital assets, which could trigger some qualitative review”.

Nevertheless, Schmidt believes that this is not the end of the game. “The refusal, however, does indicate that the placard still has reservations about encryption in the 500 and sets a higher threshold for companies in this field.”

Although MicroStrategy has been incorporated into the NASDAQ 100, MSCI World Index and the Russell 2000 Index, the placard 500 would have been a crown bead, forcing all other index funds to purchase MicroStrategy shares, thereby indirectly holding bitcoin.

However, the store ' s business model is facing multiple attacks. It has been reported that NASDAQ, which is dominated by the Science and Technology Unit, has begun to require companies holding encrypted assets to seek shareholder approval before issuing new shares to finance purchases. This is a dilution strategy directed at MicroStrategy.

Hard reality.

This year, Sequans ' share price fell by 72 per cent, with current transaction prices of $0.98 per share. In addition, the Morgan Chase data indicate that equity issuance by these companies has slowed in the last quarter, while stock prices have been under pressure due to overcrowding and investor fatigue.

In fact, investors feel this fatigue. Despite the fact that Bitcoin has reached a new historical high, the stock price of MicroStrategy and Metaplanet, an important player in the area of encrypted money banks, has fallen to a low of months. Metaplanet fell by 60 per cent from its peak in June, while MicroStrategy ' s share price was about $323, well below its July level of over $500.

Domino effect
For Morgan Chase, the real danger lies in the contagion effect. “Other index providers who have included the encryption of the money bank of MicroStrategy or other enterprises in their stock index may reconsider their approach.” If NASDAQ or MSCI follow the POP and remove MicroStrategy, this could trigger the forced sale of each fund that tracks these benchmarks, implying that billions of dollars could be diverted from these companies, leading to the collapse of MicroStrategy stocks and the wider Bitcoin Treasury.

However, Schmidt remains optimistic: “As more encryption becomes marketed, grows and matures, they will naturally become part of the main index, like other industries.”