Despite the fact that micro-strategies face the possibility of being eliminated by MSCI and market concerns, the Chief Investment Officer of Bitwise, Matt Hougan, believes that his risk of selling Bitcoin is exaggerated, that the current situation is characterized by sufficient cash, low debt pressure, and that the so-called “end-of-life doctrine” is difficult to establish。
Original title: No, Virginia, Strategy Is Not Going To Sell Its Bitcoin
Original by Matt Hougan, Chief Investment Officer, Bitwise
Original language: Luffy, Foresight News
Recently, my inbox was filled with questions about Bitcoin Reserve Micro-Strategy, specifically two issues of concern:
1. WILL MICRO-STRATEGIES BE REMOVED FROM THE MSCI INDEX, LEADING TO THE FORCED SALE OF THEIR SHARES
2. Will micro-strategies be forced to sell bitcoin holdings
Let's look at it one by one。
ON OCTOBER 10TH, MSCI ANNOUNCED THAT IT WAS CONSIDERING REMOVING ENCRYPTED ASSET RESERVE COMPANIES (DAT) SUCH AS MICRO-STRATEGIES FROM ITS INVESTIBLE INDEX. THIS IS SIGNIFICANT BECAUSE NEARLY $17 TRILLION OF ASSETS ARE BENCHMARKED AGAINST THESE INDICES. MORGAN CHASE ESTIMATED THAT IF MICRO-STRATEGIES WERE MOVED OUT OF THE INDEX, THE INDEX FUND COULD BE FORCED TO SELL UP TO $2.8 BILLION WORTH OF MSTR STOCKS。
YOU MIGHT WONDER WHY MSCI DID IT. ITS VIEW WAS THAT COMPANIES SUCH AS SECURE ASSET RESERVE COMPANIES, SUCH AS MICRO-STRATEGY, PREFERRED HOLDING COMPANIES OVER OPERATING COMPANIES. MSCI ' S INVESTMENTABLE INDEX WOULD HAVE EXCLUDED HOLDING COMPANIES SUCH AS REAL ESTATE INVESTMENT TRUST FUNDS, WHILE MOST ENCRYPTED ASSET RESERVE COMPANIES ONLY PURCHASED AND HELD ENCRYPTED ASSETS, AND THEREFORE BELIEVED THAT THEY SHOULD NOT HAVE A PLACE IN THE INDEX. AFTER COMMUNICATING WITH CLIENTS, MSCI WILL PUBLISH ITS FINAL DECISION ON JANUARY 15。
I CAN'T PREJUDGE THE FINAL DECISION OF MSCI. AS A SENIOR RESEARCHER IN THE FIELD OF INDICATORS, I WAS THE EDITOR OF THE ACADEMIC JOURNAL INDEX MAGAZINE FOR 10 YEARS, AND I BELIEVE THAT THERE ARE TWO POSSIBILITIES. MICHAEL SELLER AND OTHERS HAVE ARGUED STRONGLY THAT MICRO-STRATEGY IS A SOLID OPERATING COMPANY WITH A ROBUST SOFTWARE BUSINESS AND COMPLEX FINANCIAL ENGINEERING OPERATIONS AROUND BITCOIN. THIS STATEMENT MAKES SENSE AND I MYSELF AGREE WITH ITS OPERATIONAL ATTRIBUTES. BUT IT IS NOT A MATTER OF CRUCIFIXION, AND I CAN IMAGINE THAT SOME OF THE BODIES WOULD HAVE TAKEN THE OPPOSITE VIEW. GIVEN THE CONTROVERSIAL NATURE OF THE ENCRYPTED ASSET RESERVE COMPANY, AND THE FACT THAT MSCI IS NOW INTENDING TO REMOVE IT, I SUSPECT THAT MICRO-STRATEGY IS AT LEAST 75% LIKELY TO BE MOVED OUT OF THE INDEX。
BUT I DON'T THINK THAT BEING REMOVED WOULD HAVE A DISPROPORTIONATE IMPACT ON THEIR STOCKS. WHILE $2.8 BILLION APPEARS TO BE ON A LARGE SCALE, MY EXPERIENCE WITH THE INCLUSION AND ELIMINATION OF EVENTS IN MULTI-YEAR OBSERVATIONS SHOWS THAT THEIR REAL IMPACT IS OFTEN SMALLER THAN EXPECTED AND CAN BE ABSORBED BY THE MARKET AHEAD OF SCHEDULE. FOR EXAMPLE, LAST DECEMBER, WHEN THE MICRO-STRATEGY WAS INCORPORATED INTO THE NASDAQ 100 INDEX, THE FUND THAT TRACKED THE INDEX HAD TO BUY $2.1 BILLION IN MSTR EQUITIES, BUT ITS SHARE PRICE HAD HARDLY FLUCTUATED。
I THINK THAT THE SMALL DECLINE IN MSTR STOCK PRICES SINCE OCTOBER 10 IS DUE IN PART TO THE FACT THAT THE MARKET HAS PRE-RECORDED THE EXPECTATIONS OF THE "REMOVED INDEX." AT THIS STAGE, HOWEVER, THERE WILL BE NO SIGNIFICANT FLUCTUATIONS IN THEIR SHARE PRICES。
IN THE LONG RUN, THE VALUE OF MSTR DEPENDS ON THE EFFECTIVENESS OF ITS STRATEGIC IMPLEMENTATION, RATHER THAN WHETHER INDEX FUNDS ARE FORCED TO HOLD THEIR SHARES。
Another question is whether micro-strategies will sell bitcoin. The concern of the empty people is as follows:
• MICRO-STRATEGY MOVED OUT OF THE MSCI INDEX
• THE COLLAPSE OF THEIR SHARE PRICES TO LEVELS FAR BELOW NET ASSETS (NAV)
:: Eventually forced to sell bitcoin。
THIS LOGIC SEEMS TO BE CONSISTENT, BUT UNFORTUNATELY IT IS TOTALLY UNTENABLE. THE MSTR STOCK PRICE BREAKS DOWN THE NET ASSET VALUE AND DOES NOT TRIGGER THE SALE OF BITCOIN, AND YOU CAN REVIEW AND ACCOUNT FOR IT YOURSELF。
Micro-strategy debt is subject to only two key performance obligations: interest payments of about $800 million per year and conversion or renewal of part of the debt instrument when it expires。
There is no need to worry about interest payments in the short term. The company currently held $1.4 billion in cash, which was enough to pay interest for a year and a half。
Similarly, debt swaps are not a recent challenge. The first debt instruments will expire only in February 2027 and will be on a scale of only about $1 billion, which is nothing more than a dime for a small strategy of holding $60 billion bitcoin。
IF MTR STOCK PRICES CONTINUE TO DECLINE, WILL THE INSIDERS SELL BITCOIN? THE POSSIBILITY IS EXTREMELY LOW. MICHAEL SELLER OWNS 42% OF THE VOTING SHARES, AND IT'S HARD FOR YOU TO FIND SOMEONE STRONGER THAN HE'S GOT A LONG-TERM VALUE FOR BITCOIN. IN 2022, MSTR STOCK PRICES WERE ALSO IN DISCOUNT, WHEN HE HAD NOT BEEN SOLD。
I UNDERSTAND WHY THE EMPTY WORDS OF THE "END OF THE DAY" ARE TOO MUCH FOR MICRO-STRATEGY. IF MICRO-STRATEGIES WERE FORCED TO SELL $60 BILLION IN BITCOIN IN ONE-TIME, THE BLOW TO THE ENTIRE BITCOIN MARKET WOULD BE DEVASTATING, ON A SCALE EQUAL TO TWO YEARS OF INFLOWS OF BITCOIN ETF. HOWEVER, GIVEN THAT THE COMPANY HAD NO MATURITY OBLIGATIONS UNTIL 2027 AND THAT THE CASH WAS SUFFICIENT TO COVER PREDICTABLE INTEREST EXPENDITURES, SUCH EXTREMES COULD NEVER OCCUR. WE SHOULD ALSO LOOK AT THE CURRENT SITUATION FROM A MORE MACRO PERSPECTIVE: AT THE TIME OF WRITING, THE PRICE OF BITCOIN WAS ABOUT $92,000, DOWN 27 PER CENT ABOVE HISTORICAL HEIGHTS, BUT STILL 24 PER CENT ABOVE THE AVERAGE COST OF HOLDING A BITCOIN FOR MICRO-STRATEGIES ($74,436). THE WORD "END" IS NOTHING BUT NONSENSE。
If you really want to worry about something in the encryption industry, there are a lot of things that deserve attention. For example, I am somewhat concerned about the speed with which the bill on market structures at the level of Congress is moving forward, but as government agencies resume normality, I believe that it will accelerate; I am also concerned that some of the small and poorly operated encrypted asset reserve companies may collapse; and I expect that the encrypted asset reserve companies will not significantly increase bitcoin in 2026, which means that the market will lose an important source of immediate demand。
But for micro-strategies:
• THERE IS NO NEED TO WORRY ABOUT THE IMPACT OF MSCI'S DECISIONS ON MICRO-STRATEGIC EQUITY PRICES, THE ACTUAL IMPACT IS MUCH SMALLER THAN MOST PEOPLE EXPECTED AND THE PROBABILITY IS ABSORBED BY THE MARKET
• There is no reasonable mechanism to force it to sell bitcoin in the short term, which will not happen。
The strong belief of the Bitcoin has to pay the price: to remain calm and patient when markets fluctuate. No one understands this better than Sylar and micro-strategy, because they are equally aware of the other side of that patience. In the long run, this commitment will eventually yield substantial returns。