$BTC

In-depth explanation of the reasons behind the significant drop of 11.21 BTC: Panic after MSTR was removed from the MSCI index

The removal of MSTR from the index is indeed a huge negative factor, signifying that MSTR is no longer recognized by traditional stock indices. Will it lead to MSTR selling BTC? Will it cause a collapse of BTC?

This article will use concise language to help everyone clarify the logic and not be misled by sensational media.

1. MSTR ≠ ETF. When an ETF is redeemed, it must sell coins on-chain. But MSTR is just a company; the index fund sells its “stocks,” not its “BTC.” A change in shareholders does not mean Saylor will sell coins. The on-chain selling pressure = 0.

2. The real blow is the “flywheel failure.” MSTR's strength in the previous bull market was in leveraging high premiums to issue bonds/offer shares, acquiring BTC at a low cost. Being kicked out of the index may cause the stock price to drop > premium to disappear (which would naturally happen in a bear market, without needing to be kicked out of the index) > financing ability to buy coins to dry up, and BTC will lose its largest “persistent buyer,” rather than increase “sellers.”

3. Conclusion: This will lead to a slowdown in upward momentum, rather than a death spiral. Market sentiment may panic (FUD) due to a stock price crash, but this will not actually affect the fundamentals of BTC. Saylor has never sold Bitcoin in the past four years and is very likely not to do so in the future unless absolutely necessary (probably if BTC falls to 15,000 USD).

Therefore, the brother believes that MicroStrategy's holdings will not exert selling pressure on the market, but MSTR and BTC have always been positively correlated. So when MSTR faces sell-offs and declines, BTC is likely to drop as well (see Figure 2, MSTR's drops and rises generally occur faster and with greater amplitude than BTC), but not because Saylor is selling BTC.