JPMorgan Says Strategy’s S&P 500 Rejection is a Major Blow To Crypto Treasuries

On September 5, an S&P 500 committee denied Michael Saylor’s Strategy inclusion into the index despite meeting all the requirements. Analysts at JPMorgan have called this decision a major setback for crypto treasury firms, saying it could affect how companies approach crypto investments going forward.

Strategy’s Rejection From S&P, A Major Blow to Crypto Treasuries, JPMorgan

In a recent investor note, JPMorgan analysts explained that the decision of the S&P 500 committee to reject Strategy’s inclusion in the index could be a major setback for crypto treasuries. Led by Nikolaos Panigirtzoglou, the analysts stated that the decision could extend beyond Strategy and affect the growing number of companies establishing crypto treasuries.

We recently reported that Bitcoin treasuries now hold over 1 million BTC as companies capitalize on the trend and returns of holding crypto. The analysts opined that the rejection could be caution on the part of the index over adding companies that have turned their balance sheets into large BTC holdings. 

The exclusion has sparked a reaction from the crypto community because Strategy met all the requirements to be listed on the index. Strategy has a market cap exceeding $8.2 billion, daily trading volumes of over 250,000 shares, and positive earnings in the last quarter and last year.

Strategy has previously been indexed, which has enabled its stock to shift the Bitcoin exposure into key benchmarks like the Nasdaq 100, MSCI USA, MSCI World, and the Russell 2000. The S&P 500 exclusion is an indication that this back door into institutional and retail portfolios is perhaps hitting its limit.

While this rejection could affect Strategy and its investors, JPMorgan analysts opine that the biggest effect could be on other companies following the path Strategy, the biggest corporate holder of Bitcoin, has set. 

How Will This Rejection Affect Crypto Treasuries?

In recent months, there has been a rise in the number of public companies turning to digital treasuries, including Bitcoin, Ethereum, and other altcoins. JPMorgan analysts also stressed that the rejection will affect how these companies interact with cryptocurrencies. 

With the move from the leading S&P 500, JPMorgan analysts predict that other index providers such as MSCI and Russell could also rethink their treatment of companies with corporate crypto treasuries. Already, NASDAQ has tightened its rules, requiring companies with large crypto holdings to seek shareholder approval to issue new shares to purchase digital assets or face delisting.

JPMorgan further opined that corporate crypto treasuries are already under pressure. They observed indicators of weariness in stock behavior, such as a decrease in accumulation rates and the gradual slackening of overall accumulation. The number of shares issued has been lower in recent months than it was during the past two quarters.

Some were experimenting with complicated financial instruments like Bitcoin-backed loans and token-linked convertible bonds. With the tightening of the requirements, JPMorgan warns that crypto investments could change course from treasuries and flow into crypto firms with actual operational businesses, including exchanges and mining firms.