MicroStrategy Bitcoin premium welcomes the "crypto winter"! MSCI excludes fearing outflow of 8.8 billion USD.

TD Cowen Research Group Managing Director Lance Vitanza warned that MicroStrategy's (MSTR) Bitcoin premium continues to decline and is currently heading towards the “Crypto Assets winter” lows of 2021-2022. TD Cowen still maintains a price target of $535 for MicroStrategy, but the MSCI index may remove MicroStrategy in February next year, which could lead to an additional $8.8 billion outflow if other indices follow suit.

MicroStrategy Bitcoin premium collapses to Crypto Assets winter levels

(Source: TD Cowen)

Vitanza shared two Bitcoin premium charts from MicroStrategy updates and stated that MicroStrategy did not issue any shares today under its At The Market (ATM) plan, nor did it purchase any new Bitcoins—this detail has sparked renewed attention on the current premium levels. The charts date back to 2020, showing that the indicator is steadily narrowing, approaching the levels seen at the end of 2021 and the beginning of 2022.

For MicroStrategy, the Bitcoin premium refers to the difference between the price investors pay for MicroStrategy's stock and the net asset value of its Bitcoin holdings. When the stock trading price approaches the value of the Bitcoin it holds, the premium narrows; conversely, when investors view the company as a leveraged tool for investing in Bitcoin, the premium widens. The chart shows that the premium has significantly decreased from its peak at the end of last year.

This narrowing premium technically means that the market valuation of MicroStrategy's stock is returning to its underlying asset value. At the peak of a bull market, investors are willing to pay a high premium for MicroStrategy because they expect the company to generate excess returns through leveraged strategies and continuous accumulation of Bitcoin. However, during bear markets or periods of market uncertainty, this confidence diminishes, and investors are no longer willing to pay an additional premium for the “Bitcoin leveraged instrument” story.

The collapse of the premium to levels seen during the crypto winter is of significant historical comparative meaning. During the crypto winter of 2021-2022, Bitcoin plummeted from a high of $69,000 to around $15,000, a drop of over 78%. During that period, MicroStrategy's Bitcoin premium also fell to extremely low levels as market confidence in Bitcoin and crypto assets hit rock bottom. The current premium returning to similar levels suggests that market sentiment is similarly pessimistic, which serves both as a risk warning and possibly a signal for long-term investors.

From another perspective, a shrinking premium also means that investors can now purchase MicroStrategy stocks at prices closer to “fair value.” For those investors who believe in the long-term value of Bitcoin, when the premium approaches zero or is negative (i.e., the stock price is below the net value of Bitcoin holdings), it is the best time to accumulate at low prices. This situation occurred during the crypto winter, and investors who bought then achieved remarkable returns in the subsequent bull market.

MSCI Removes Threat of 8.8 Billion USD Fund Outflow Risk

The report also highlights concerns that MicroStrategy may be removed from the MSCI index - this risk has put pressure on the stock. Vitanza and Navarrete stated that they do expect MicroStrategy to be removed from the index and will continue to be dragged down by the MSCI index. The report noted: “Although this feels a bit erratic, we now anticipate that PBTCs (public Bitcoin treasury companies) like MicroStrategy will be removed from all MSCI indices in February next year. MSCI itself has also made a similar proposal, and we expect this decision to be officially announced in mid-January.”

The report added: “This decision may be both regrettable and misleading. MicroStrategy is neither a fund, nor a trust, nor a holding company. It is a publicly traded operating company with a $500 million software business, employing a unique Bitcoin capital management strategy as productive capital. Although the software business may account for only a small portion of the total value, it contributes 100% of the company's revenue.”

The report points out that removing PBTC from the MSCI index will require a massive sell-off by passive funds, and the current stock price of MicroStrategy is already at a depressed level. The report states: “We do not understand what benefit it has for anyone to force passive investment funds to recognize actual losses, but we believe that about $2.5 billion of value in the MSCI index is attributed to MSTR's holdings, and approximately $5.5 billion of value in other indices could theoretically also follow the MSCI's approach.”

Last week, analysts from JPMorgan also expressed a similar view, stating that if MSCI removes it from the index, MicroStrategy could face around $2.8 billion in capital outflows; if other index providers follow suit, an additional $8.8 billion in capital outflows may occur. Such a scale of passive selling would put immense pressure on MicroStrategy's stock price, as index fund sell-offs are mechanical and disregard valuation, potentially causing the stock price to deviate further from its intrinsic value.

Potential Impact of MSCI Excluding MicroStrategy

MSCI Index Outflows: Approximately $2.5 billion in passive funds forced to sell.

Other Index Follow-up: An additional outflow of 5.5-8.8 billion USD may occur.

Total Threat: Sell-off pressure may reach up to 11.3 billion USD.

Schedule: Expected to be officially announced in mid-January 2026, execution in February.

Saylor remains steadfast, TD Cowen maintains $535 target

At that time, Saylor responded to the possibility of being removed from the index by stating: “Index classification does not define us. Our strategy is long-term, and our belief in Bitcoin is unwavering. Our mission remains consistent: to establish the world's first digital currency institution based on sound money and financial innovation.” This firm attitude shows that MicroStrategy will not change its Bitcoin accumulation strategy due to the index removal.

Despite the continued decline in premiums, Vitanza and his colleague Jonnathan Navarrete remain optimistic about MSTR. They maintain a buy rating and a target price of $535—about 200% higher than MicroStrategy's current stock price of around $180—calling it a “reasonable outcome a year from now.” This steadfastly optimistic rating stands out particularly in the current market environment.

Vitanza and Navarrete pointed out in a detailed report released separately on Monday: “We maintain our fundamental expectations for Bitcoin prices and continue to anticipate that by the end of fiscal year 2027, the company will hold 815,000 Bitcoins. Therefore, we continue to forecast that by December 2027, the Bitcoin holdings will exceed 18.5 billion dollars, with a target price per Bitcoin in December 2027 having an intrinsic value premium of 0%.”

TD Cowen's Vitanza and Navarrete seem to align with Saylor's position. They wrote in the report: “The bias against MicroStrategy is a bias against Bitcoin. We expect that the greater the recovery of Bitcoin, the better MicroStrategy's performance will be.” They added: “Regardless of whether included in the index, this strategy's pace of increasing Bitcoin holdings will continue to exceed the corresponding liabilities. While this may contradict intuition, if Bitcoin increasingly integrates into the global financial system, then MicroStrategy's trading price will inevitably be higher than the value of its underlying assets.”

The core logic of this argument is: MicroStrategy is not just a passive holder of Bitcoin, but an active Bitcoin accumulation machine. By issuing convertible bonds, increasing stock issuance, and other financial instruments, MicroStrategy can leverage and increase its Bitcoin holdings at a low cost. This proactive capital operation capability is an advantage that cannot be compared to direct Bitcoin holdings, and thus should command a premium. When the market re-recognizes this value, the Bitcoin premium will expand, driving a significant increase in MicroStrategy's stock price.