Michael Saylor's Strategy, formerly known as MicroStrategy, has found itself significantly exposed to the ongoing downturn in the cryptocurrency market, which has seen more than $1 trillion in total market capitalization wiped out over the past month. As the largest public holder of Bitcoin, with over 650,000 coins, the company is now facing the real threat of being removed from major benchmark indices, which have been crucial for its visibility in mainstream portfolios. Analysts Predict Major Impact On Strategy According to a recent Bloomberg report, analysts at JPMorgan Chase have issued a warning that Saylor's firm may lose its standing in key indices such as MSCI USA and the Nasdaq 100. Related Reading: CEO Cuts Cardano Founder's Bitcoin Price Forecast, Warns Bear Market Just Starting The analysts assert that this could result in passive outflows estimated between $2.8 billion and $8.8 billion if MSCI proceeds with a decision expected by January 15. Passive funds connected to the company currently account for nearly $9 billion in market exposure, making any index exclusion a substantial blow. Strategy's business model has relied on a cyclical strategy of selling stock to buy Bitcoin, capitalizing on price rallies, and repeating this process. At its zenith, Saylor's company's market capitalization far exceeded the value of its Bitcoin holdings. However, that premium has evaporated, and the company's valuation now aligns closely with its crypto reserves--a stark indication that investor confidence is fading rapidly. "While active managers are not bound to adhere to index changes, exclusion from major indices would undoubtedly be viewed negatively by market participants," noted JPMorgan analysts, led by Nikolaos Panigirtzoglou. Such a shift could affect liquidity, increase funding costs, and diminish overall investor appeal. MSCI Contemplates New Index Inclusion Rules In its ongoing consultations with stakeholders, MSCI indicated that some market players believe digital asset treasury firms (DATs) may function more like investment funds, which are ineligible for index inclusion. In accordance with these perspectives, MSCI has proposed excluding companies whose holdings in digital assets constitute 50% or more of their total assets from its global investment market indexes. Related Reading: BlackRock's Bitcoin ETF Bleeds Over $500 Million In Its Biggest One-Day Outflow Since peaking last November, Saylor's firm has seen its shares (MSTR) decline by over 60%, causing a collapse in the premium that once attracted momentum and crypto-focused investors. Despite this slump, Saylor's company remains up over 1,300% since he first began purchasing Bitcoin in August 2020, outperforming major equity indices throughout this period. The selloff has extended its reach into the company's newer funding structures, as well. The prices of its perpetual preferred shares--an essential part of Saylor's recent strategies--have seen sharp declines. Additionally, yields on securities issued in March have risen to 11.5%, up from a previous 10.5%. A recent euro-denominated preferred stock offering has already dropped below its discounted offering price in under two weeks. Michael Youngworth, head of global convertible bond strategy at Bank of America Global Research, remarked, "That premium has collapsed in recent weeks," adding that the present situation makes capital raising increasingly challenging. Feature image from DALL-E, chart from TradingView.com