MSCI's Decision on MicroStrategy Shakes Up Bitcoin Markets | US Crypto News

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Key Takeaways

MSCI's capping of new MSTR shares impacts automatic buying mechanisms in the market.
Some crypto experts argue that the significance of this cap may be overstated.
Despite changes in MSCI’s index rules, there remain areas for potential growth in Bitcoin-backed corporate stock.
Long-term optimism for Bitcoin adoption and price increase persists, despite current constraints.

Grab your coffee, get comfortable, and get ready, because MSCI's recent limit on new MSTR shares has taken away an essential automatic buying mechanism. However, the market is far from entirely constrained. Today's US Crypto News emphasizes the ongoing friction between traditional finance (TradFi) and the digital asset space.

Today's Crypto News: Max Keiser Discusses MSCI's MSTR Cap

Bitcoin's subdued reaction to MSCI's recent decision on its index has ignited discussions among investors, analysts, and crypto commentators about whether the market is fundamentally constrained or being subtly manipulated.

The latest amendments to MSCI's policies regarding crypto-heavy treasury companies, including MicroStrategy (MSTR), have eliminated a vital source of passive buying. However, notable figures like Max Keiser argue that the implications may be exaggerated.

MSCI has now decided not to include newly issued shares from firms like MSTR in its indexes. Previously, large index funds were automatically required to buy these shares, leading to regular buying pressure. With the new regulations, this automatic demand has vanished, diminishing dilution-driven capital inflows and cooling short-term market reactions.

So why isn't Bitcoin surging in response to MSCI's news?

MSCI announced that it would not remove Bitcoin and crypto treasury companies from its indexes. However, they have implemented a new rule stating that when treasury firms issue new shares, these additional shares will not be added to the indexes.

Max Keiser dismissed the MSCI limitations, noting that forced buying still takes place when MSTR stock appreciates alongside Bitcoin. “The MSCI cap on excluding new MSTR shares from its weighting is insignificant. Forced buying occurs when the Bitcoin-heavy MSTR stock price increases,” Keiser emphasized.

While this indicates that potential upward momentum isn't entirely extinguished, the dampening impact on automated index-driven flows shouldn't be overlooked. Analysts voice concerns that MSCI's new regulations could freeze potential upside while still allowing MSTR to remain in its indexes.

By minimizing passive inflows, this change hampers the growth of Bitcoin-backed corporate stocks and reflects TradFi's broader hesitance towards crypto adoption. Although this may impede MSTR's inclusion in the S&P 500 this year, expectations still suggest it will outperform the index, albeit facing challenges from established financial entities.

“I believe it’s evident that MSTR will need to strive hard for success…I still anticipate it to significantly outperform the S&P 500 this year, but the influential parties won't make it straightforward,” analyst Zynx stated.

Despite these obstacles, MSTR has demonstrated capital strength. Adam Livingston noted that the company recently amassed $3.7 billion in premium through SCALE and mNAV mechanisms, allowing it to efficiently raise capital, increase Bitcoin per share, and enhance dollar liquidity.

MSCI Index Changes Spark Claims of Bitcoin Market Manipulation by Institutions

A number of commentators have described the unfolding situation as a coordinated effort from Wall Street. Quinten Francois, Ash Crypto, and The Crypto Room observed a sequence in events: MSCI’s October threats, months of suppressed prices, Morgan Stanley’s ETF filings, and MSCI’s sudden policy reversal appear to follow a pattern.

They allege there may be collusion between MSCI (originally a Morgan Stanley division) and JP Morgan, suggesting that FUD (fear, uncertainty, and doubt) is being spread to manage exposure. Even with the short-term challenges brought on by the index mechanics, long-term optimism remains. Prominent investor Tim Draper envisions 2026 as a breakout year for Bitcoin adoption, projecting significant advancements.

Chart of the Day

Bitcoin (BTC) Price Performance. Source: TradingView

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