MSCI's DATCO Index 'Lifeline' Smothers Bitcoin Equity Playbook

MSCI’s decision to retain Digital Asset Treasury Companies (DATCOs) in global indices through February 2026 masks a structural shift that disrupts their capital-raising mechanisms.

By freezing the Number of Shares (NOS) for these securities, the index provider has severed the feedback loop where passive demand fueled further equity issuance.

This policy eliminates the automatic replenishment of capital that once allowed DATCOs like Strategy to fund Bitcoin purchases through $15 billion in new share offerings in 2025.

MSCI stated:

"MSCI will not implement increases to the Number of Shares (NOS)... for these securities"

The freeze directly impacts the $600 million in passive demand previously captured by index funds, as calculated by Bull Theory.

With JPMorgan estimating a potential $3B–$9B passive sell-off risk had Strategy been excluded, the retention policy instead forces DATCOs to seek private buyers or offer discounts to maintain liquidity.

This shift from algorithmic capital to active investors creates a new layer of volatility, particularly as DATCOs now face "premium-to-NAV volatility" challenges compared to Bitcoin ETFs.

Morgan Stanley’s recent filing for a Spot Bitcoin ETF underscores the competitive realignment.

As institutional investors pivot toward products with clearer fee structures and regulatory clarity, DATCOs must now justify their value proposition in a market increasingly dominated by ETFs that capture both inflows and management fees more efficiently.

Look, the erosion of passive demand isn’t just a technicality—it’s a fundamental reordering of capital flows. DATCOs can no longer rely on index-driven liquidity to scale their Bitcoin exposure, forcing them to compete directly with ETFs in a market where fee capture and volatility management are now existential battles.

⚠️ LEGAL DISCLAIMER: This article is for informational purposes only and does not constitute financial or investment advice.