Bitcoin’s (BTC) recent decline is attributed to three main factors: uncertainty surrounding a December US Federal Reserve (Fed) rate cut, increased selling from Digital Asset Treasuries (DATs) for share buybacks, and concerns over Strategy’s (MSTR) potential removal from the MSCI USA Index. BTC dropped to $85,000, down over 20% in November, with a previous dip exacerbated by September’s jobs data strengthening beliefs of a Fed pause, leading to $903 million in US spot Bitcoin ETF outflows on Thursday. However, Friday saw rate-cut expectations rebound above 70% after dovish Fed comments from John Williams and Stephen Miran provided temporary relief.
DATs are selling Bitcoin to finance share buybacks as their share prices fall below Net Asset Value (NAV). Additionally, some institutional investors are unwinding long-short positions (shorting DATs like MSTR while holding BTC via ETFs) after significant gains, adding downward pressure. Strategy’s potential removal from the MSCI USA Index due to its high Bitcoin holdings (exceeding 50% of assets) could trigger $8.8 billion in outflows, as per JPMorgan. MSCI initiated a review on October 10, coinciding with a $19 billion crypto market liquidation. Strategy CEO Michael Saylor, however, argues the company is a publicly traded software firm with a Bitcoin-backed treasury, not a passive holding company, distinguishing it from MSCI’s target. Despite his defense, BTC is currently about $10,000 above Strategy’s average $74,000 cost basis. Research head André Dragosch suggests a final BTC bottom could be between Strategy’s average purchase price and BlackRock’s IBIT average cost basis of $84,000.
