JPMorgan says S&P 500 rejects Strategy as a "crackdown on cryptocurrency treasury"

According to Coin World Network, JPMorgan analysts said that although Strategy (formerly MicroStrategy) technically meets the qualification standards, the S&P 500 Index Committee decided last week to refuse to include it in the index, which is a "hit" for crypto-treasury bonds. Analysts led by managing director Nicholas Panigirzoglu said in a report Wednesday that the rejection was a setback not only for Strategy, the largest public cryptocurrency finance company, but also for similar companies that have emerged in recent months. Analysts said the index committee had discretion in the selection process, and this decision showed that the committee was cautious when including companies that had converted their balance sheets into large bitcoin holdings. Index membership has been a major driver of Strategy stock, allowing Bitcoin exposure to penetrate into major benchmark indices such as the Nasdaq 100, MSCI U.S. Index, MSCI Global Index and Russell 2000 Index. The S&P 500 exclusion suggests that this indirect channel into institutional and retail portfolios “may be reaching its limits,” analysts wrote. The greater risk, they added, is that other index providers that have been included in Strategy or other crypto finance companies may rethink their approach. As the S&P 500 was rejected, other adverse factors were also accumulating. Nasdaq has begun requiring companies holding large amounts of cryptocurrencies to obtain shareholder approval before issuing new shares to raise further purchase funds. Strategy, which had previously promised not to issue shares at a price-to-earnings ratio of less than 2.5 times, quickly abandoned that promise last month. Cryptocurrency fund management companies are already under pressure as investors become increasingly wary of crowded trading and weak performance. Analysts said stock prices and financing activities showed obvious "tiring" and stock issuance slowed sharply in recent quarters. Debt issuance continues, but the risk premium is rising. Some corporate finance departments have tried more complex financing structures, including Bitcoin-backed loans, token-linked convertible bonds and structured spending to expand the model. But analysts warn that suspicion is increasing and capital may turn to cryptocurrency companies that have operations such as exchanges and miners, rather than balance sheet-driven financial companies.