JPMorgan: S&P 500 Rejects Strategy for Inclusion, A Major Blow to Bitcoin Treasury Model

JPMorgan's latest report indicates that, although Strategy (formerly MicroStrategy) technically meets the qualifications for inclusion in the S&P 500 index, the index committee decided last week to exclude it. Analysts believe that this move reflects a cautious market attitude towards companies that “hold a significant amount of Bitcoin as a core of their balance sheets,” impacting the entire encryption treasury model.

Technical qualification rejected, releasing cautious signals

(Source: The Block)

The analysis team led by JPMorgan Managing Director Nikolaos Panigirtzoglou pointed out in a report that although the Strategy meets technical thresholds such as financials and market capitalization, the S&P 500 Index Committee has discretion and ultimately chose not to include it.

Analysts believe that this reflects the committee's cautious attitude towards companies with large allocations of Bitcoin on their balance sheets, and it also suggests that the channels for indirectly introducing Bitcoin exposure into institutional and retail investment portfolios through large indices may have reached their limits.

The impact goes beyond Strategy, other encryption financial companies may also be affected

The report warns that other index providers that have already incorporated strategies or similar encryption fund companies may reassess their constituent stock composition.

The strategy has gained capital inflows and market attention in the past by being included in several major indices (such as the Nasdaq 100, MSCI US and Global Indices, Russell 2000); however, the rejection by the S&P 500 may weaken its penetration in institutional portfolios.

Financing and market pressure are rising simultaneously

While the S&P 500 is rejecting, other adverse factors are also accumulating. It is reported that Nasdaq has required companies holding a large amount of encryption assets to obtain shareholder approval before issuing new shares to raise funds to purchase more Bitcoin.

Strategy had promised not to issue stocks at a price-to-earnings ratio lower than 2.5 times, but this commitment was abandoned last month. JPMorgan pointed out that as investor concerns over crowded trades and weak performance intensified, the stock prices and financing activities of cryptocurrency financial companies showed a slowdown. Although debt financing continues, the risk premium has clearly increased.

Capital may shift towards encryption companies with physical business

Some corporate finance departments are trying to extend their models through Bitcoin collateral loans, token-linked convertible bonds, and structured expenditures, but analysts believe that market skepticism is rising.

In the future, capital may be more inclined to flow towards cryptocurrency companies that have actual operating businesses, such as exchanges and mining companies, rather than just relying on financial companies that hold coins on their balance sheets.

Conclusion

J.P. Morgan's analysis shows that the S&P 500's rejection of the Strategy Index is not just a setback for the company, but may also be a turning point for the entire “Bitcoin treasury model.” As regulations and market attitudes become more cautious, future encryption financial companies may face more severe challenges in financing and market positioning.