Strategy Not Selling Bitcoin amid MSCI Index Rumors, Says Bitwise CIO

Matt Hougan, CIO of Bitwise, downplays concerns about forced liquidation by emphasizing Strategy's substantial cash reserves and long-term debt schedule.

In response to mounting rumors that Strategy (previously MicroStrategy) could be forced to liquidate its bitcoin assets, Bitwise Chief Investment Officer Matt Hougan called the narrative "just flat wrong." Hougan responded to two frequently asked issues in a client note titled "No, Virginia, Strategy Is Not Going To Sell Its Bitcoin": whether Strategy will be taken out of MSCI indexes and whether doing so would require the business to sell its multibillion-dollar bitcoin holdings.

A judgment regarding the exclusion of digital asset treasury businesses from MSCI's investable indexes is anticipated by January 15. According to JPMorgan, a removal of this kind might result in the passive sale of up to $2.8 billion worth of Strategy shares. According to Hougan, there is a 75% possibility that Strategy will be eliminated, although history demonstrates that index modifications have much less of an impact than investors fear. For example, $2.1 billion in transactions were made after Strategy was added to the Nasdaq-100 last year, yet its price hardly changed. He doesn't anticipate big fluctuations because he thinks the market has already factored in the possible elimination of the MSCI.

Also, Hougan disregarded concerns that a removal may set off a downward cycle that would force the corporation to sell bitcoin. Strategy's two main debt commitments are managing future maturities and paying about $800 million in interest each year. But neither puts pressure on you right away. In addition to declaring a new U.S. dollar reserve of $1.44 billion to support dividends and interest payments, the business recently bought 130 BTC for $11.7 million, increasing its total holdings to 650,000 BTC. The strategy is to keep enough cash on hand to pay dividends for at least 12 months and gradually increase reserves to cover 24 months.

Although Hougan underlined that short-term commitments can be readily met, with the first debt maturity not due until February 2027, co-founder Michael Saylor has repeatedly stated that Strategy may sell bitcoin if necessary. He added that forced liquidation is unlikely because of Saylor's strong belief in Bitcoin and his ownership of 42% of voting shares.

Because bitcoin is currently trading at about $93,000, which is 25% more than Strategy's average acquisition price of $74,436, Hougan came to the conclusion that concerns about a forced bitcoin sale are unjustified. He contended that although investors have valid worries regarding the structure of the cryptocurrency industry and smaller digital asset firms, Strategy's bitcoin holdings shouldn't be among them.