The S&P 500 committee excluded Strategy, formerly MicroStrategy, from its index despite eligibility, prompting concerns from JPMorgan analysts about the future of crypto treasury companies and a potential shift in capital to operational crypto businesses.

Executive Summary

The S&P 500 committee's decision to exclude Strategy (formerly MicroStrategy) from its index, despite the company meeting all formal inclusion criteria, marks a significant moment for companies with substantial Bitcoin treasury holdings. This move, viewed by JPMorgan analysts as a setback for "crypto treasury" companies, suggests a cautious stance from traditional finance towards balance sheet-heavy crypto exposure and could redirect capital towards operational cryptocurrency businesses.

The Event in Detail

Strategy, a prominent corporate holder of Bitcoin, met established S&P 500 inclusion criteria, including market capitalization, liquidity, and four consecutive quarters of positive earnings. Despite these qualifications, the company was not added to the index, while Robinhood Markets was included. This disparity highlights the discretionary nature of the S&P 500 committee's selection process, which is composed of senior analysts from S&P Dow Jones Indices whose identities remain undisclosed. The committee's decision is seen to reflect concerns regarding Strategy's unique reliance on Bitcoin for its corporate treasury and market value, introducing a level of volatility deemed inconsistent with the index's mandate for stable, diversified market exposure. For instance, Strategy's stock volatility has been estimated at 3 to 4 times higher than the S&P 500 average, as its movements are closely tied to Bitcoin's price. This exclusion prevents passive index funds from automatically acquiring Strategy shares, limiting an anticipated influx of capital estimated at $15 billion.

Financial Mechanics & Business Strategy

MicroStrategy, now Strategy, pioneered the corporate Bitcoin treasury model, initiating its strategy in 2020 by acquiring 21,454 Bitcoin for $250 million. As of September 2025, the company held over 200,000 Bitcoin. This strategy has positioned Strategy's shares as a proxy for Bitcoin price movements. JPMorgan warned of risks associated with Strategy's Bitcoin acquisitions, including its $2 billion worth of purchases within a six-month period. This included an $821 million Bitcoin acquisition between February 26 and March 10, following the sale of $1.2 billion in senior convertible notes earlier in the year. These convertible notes are debt securities that can be converted into company shares. Collectively, Bitcoin treasury companies have raised approximately $33.7 billion to fund Bitcoin acquisitions, comprising $20.9 billion from common stock, $3.35 billion from preferred equity, and $9.48 billion from debt. Interest rates on this debt vary, ranging from 0% for some companies like Strategy and Marathon to 12% for others, with much of this debt being unsecured and convertible. New accounting standards (FASB's fair-value rules for digital assets), effective in 2025, allowed Strategy to report Bitcoin at its current market value, contributing to its first GAAP profit in early 2025, including a $14 billion unrealized gain on Bitcoin holdings.

Market Implications

The S&P 500's decision could deter traditional investors from companies whose primary asset is cryptocurrency, potentially leading to a re-evaluation of valuation models for "crypto treasury" companies. This may encourage a greater focus on revenue-generating crypto businesses, such as exchanges and miners, rather than those primarily holding digital assets on their balance sheets. JPMorgan anticipates a shift in capital flows towards these operational crypto companies. The exclusion of Strategy also raises questions about future index inclusion criteria for crypto-related entities and could accelerate the development of crypto-adjacent products like Exchange Traded Funds (ETFs) as alternative capital conduits, bypassing traditional index barriers. While the decision delays immediate tailwinds, the long-term institutional adoption of Bitcoin as a strategic asset remains broadly intact, with institutional capital increasingly directed towards compliant investment tools like Bitcoin spot ETFs.

Expert Commentary

JPMorgan analysts consider the S&P 500's rejection of Strategy a significant blow to the "crypto treasury" model, warning that debt-funded Bitcoin purchases add leverage and froth to the market, increasing the risk of severe deleveraging during a downturn. Bloomberg ETF analyst Eric Balchunas noted that S&P 500 inclusion is ultimately at the discretion of a "secret committee," even if a company meets all technical criteria. While the decision is seen as a setback, analyses from AInvest and Mitrade suggest that it "does not negate the long-term integration of digital assets into mainstream finance," but rather delays the immediate positive effects that Strategy's inclusion would have provided.

Broader Context

The exclusion of Strategy from the S&P 500 underscores the ongoing tension between traditional financial market stability and the disruptive potential of digital assets. Despite the formal criteria met by Strategy, the committee's preference for stable, conventional business models highlights a cautious approach to crypto-linked volatility. This context is further emphasized by the broader decline in first-level market crypto financing, which decreased by 68% from a peak of $31 billion in 2021 to $9.8 billion in 2024, with the average trade size shrinking by 59%. This indicates reduced liquidity for early crypto startups, with institutional capital increasingly flowing into regulated investment vehicles like Bitcoin spot ETFs. The challenges faced by crypto-backed equities in traditional indices may lead firms like Nasdaq to explore alternative indices tailored to accommodate companies with digital asset exposure.