Potential Risks Facing the Crypto Market Before the Critical MSCI Decision: Could This Trigger Another Bitcoin Sell-Off?

In what could soon be considered the most challenging week since November 2022, Bitcoin (BTC)—the leading cryptocurrency—witnessed a dramatic decline on Friday, sinking to an eight-month low of $80,000.

Key Takeaways

Bitcoin experienced a major decline recently, dropping to an eight-month low.
This downturn began on October 10, marked by a significant liquidation event.
Digital Asset Treasuries (DATs) are pivotal players in the market, and their potential classifications as funds could jeopardize their inclusion in indices.
A crucial ruling by MSCI is expected by January 15, 2026, that could impact the future of companies holding crypto assets.
The outcome of this ruling will significantly influence market conditions for Bitcoin and other cryptocurrencies in the coming months.

Crypto

Market experts indicate that this downturn began to take shape on October 10, when the market first exhibited signs of a downward trend. That day was marked by a severe liquidation event that wiped out nearly $21 billion within minutes, subsequently triggering a series of rapid price drops and intensifying fears across the industry.

Are Digital Asset Treasuries at Risk?

Ran Neuner, the founder of Crypto Banter, believes he has identified the causes behind the crash that started on October 10, as well as the reasons the market has struggled to recover since then.

Neuner states that two main players, known as Digital Asset Treasuries (DATs), which include firms like MicroStrategy (MSTR) among others, have acted as significant buyers influencing this market cycle. These firms aim to grow sufficiently large to gain entry into major indices.

Once included, passive index trackers are obligated to purchase substantial amounts of their stocks, enabling these companies to grow further and secure positions in additional indices—a cycle that perpetuates itself.

On October 10, MSCI, the world’s second-largest index provider, announced an important evaluation regarding the classification of firms that primarily hold crypto assets. They are questioning whether these companies should be categorized as “companies” or “funds.” If categorized as funds, they would no longer qualify for inclusion in passive indexing.

This classification is crucial because funds typically follow a cyclical process: they acquire assets, grow larger, and become eligible for additional indices, thereby boosting their asset base. A ruling on this subject is expected on January 15, 2026.

If the ruling favors classifying these companies as funds, Neuner warns that companies like MicroStrategy could be automatically removed from all indices. Such a ruling would force pension funds and other passive index holders to sell off their stakes in these firms, effectively undermining one of their core purposes.

The Crypto Market's Future Depends on the Upcoming Ruling

Considering that DATs have supported the current market cycle through considerable purchasing pressure, it seems investors recognized the implications of the October 10 announcement right away and repositioned themselves in response.

This pivotal date now appears to hold significant importance; it marked a critical realization among informed market participants about substantial risks to both cryptocurrencies and the existing market structure.

Looking forward, Neuner suggests that the market may continue to decline until the end of December. If the forthcoming MSCI announcement is unfavorable, he believes a significant sell-off could occur as investors brace for the potential exclusion from indices.

On the other hand, if the ruling is favorable, Neuner posits that it could signal the beginning of a new bull market for Bitcoin and the broader cryptocurrency sector.

Crypto The daily chart illustrates BTC’s price drop. Source: BTCUSDT on TradingView.com

At the time of writing, Bitcoin has made a slight recovery to $84,880. However, it remains 32% below its all-time high of $126,000, achieved at the beginning of October—just four days before the major crash.