11/21 Why Bitcoin Plunges: Fears of Exiting MSCI Index

The November funds outflow hit an all-time high of $2.47 billion on the BlackRock IBIT ETF, representing 63% of the $3.79 billion outflow on the U.S. spot bitcoin ETF. In particular, a new $900 million ($1.02 billion this week) buyback took place on Thursday. There are also supply and demand factors such as recent whale sales and a drop in institutional purchases, but it is presumed to be due to fear of market structural selling.

• What Happened: MSCI is currently in talks about classifying companies with more than 50% of their total assets in cryptocurrency as “digital asset holders” and excluding them from major stock indexes such as MSCI ACWI and MSCI USA. The decision will end talks on Dec. 31, and a final decision will be announced on Jan. 15 next year
• Principle of Supply and Demand: If a company like MSTR falls out of the index, passive funds that mechanically follow the index are obligated to sell the stock. JPMorgan estimates that the forced sale worth about $2.8 billion will be poured out of the Strategy alone. If other index operators follow suit, the sale could increase to $8.8 billion. Market Participants Presume They’re Selling Stocks Ahead
• Strategy (MSTR)
  The risk of MSCI index extraction is high, and if it is actually published, there is the greatest concern about passive funds leaving. In addition, it was traded at a much higher price than the value of Bitcoin held by Strategy, and this premium quickly fell due to the issue of the index exit. As a result, there are concerns that if the stock price falls, there will be less room to buy Bitcoin, which lowers the price of Bitcoin and causes the price of Strategy to fall again
  In fact, JP Morgan issued a strong warning report, saying, “There is a huge risk of outflow of funds if the MSCI index is published,” rather than directly lowering its investment opinion. Amid these concerns, extreme bearish sentiment prevails in the options market, with a surge in put option buying.