Cryptocurrencies have felt broken in recent weeks.
The largest liquidation event in market history took place on October 10th. Bitcoin was nuked. ETH and alternative currencies have fallen even more significantly. Since then, all “bounce” has disappeared on contact.
Everyone blamed US President Donald Trump’s 100% tariffs on China, macro policies, or overleveraging. These are all valid explanations for why the market crashed, but they don’t explain why the market remained persistently depressed for weeks afterward.
The missing piece appears to be a quiet document published on the same day by MSCI, the world’s second-largest index provider. It directly targets the organizations that helped drive this cycle, namely digital asset treasury companies (DATs) such as Michael Saylor Strategy (NASDAQ: MSTR).
Simply put, October 10th wasn’t just “Tariff Day.” This was also the day the market discovered that one of the largest marginal buyer groups could become structurally dysfunctional in early 2026.
What is DAT? Why is it important?
DAT is a publicly traded company whose primary business is to hold Bitcoin and other digital assets on its balance sheet. Consider strategy-style vehicles that raise equity or debt in traditional markets and use those funds to purchase other tokens such as BTC or Ether, thereby providing investors with leveraged agency in publicly traded digital assets.
Since the first DAT appeared in 2020 and the initial purchase of 21,454 Bitcoin by what was then called MicroStrategy in August of the same year, DAT has become one of the two largest structural buyers of digital assets in this cycle. These buyers fall into two categories: spot BTC (or other digital asset) ETFs and related passive vehicles, and DATs, which repeatedly issue equity or convertible debt or use other forms of financing to acquire additional digital assets.
Importantly, DAT benefits from the index embedding game through a self-reinforcing series of events. Once DAT gets large enough, it will automatically be included in MSCI and other major benchmarks, so passive index funds will need to buy shares of DAT to replicate the index composition. This index-driven demand creates further buying pressure on the stock, driving up its price and market cap.
The increased market capitalization generated by this passive purchase also improves liquidity and perceived legitimacy, increasing DAT’s ability to raise further capital (through equity issuance, convertible debt, or other financing) and use the proceeds to purchase additional digital assets to further expand its holdings and market capitalization. DAT’s increased market capitalization then translates into a larger index weight, attracting even more passive flows.
The result is a powerful flywheel effect. Index inclusion generates passive capital inflows, increasing market capitalization and index weighting, expanding funding capacity and purchases of digital assets, and feeding back into more index demand. Companies like Strategy are taking advantage of this mechanism.
But last month, MSCI suggested it could reconsider how these DATs are treated within the index, potentially “effectively cutting off the power” to this flywheel.
What MSCI announced on October 10th
On October 10, 2025, MSCI published a consultation paper entitled “Digital Asset Treasury Companies,” proposing that companies whose primary business is holding Bitcoin and other digital assets be reclassified as fund-like vehicles rather than operating companies. Under the proposal, companies could be excluded if their digital asset holdings account for more than 50% of their total assets.
MSCI’s main stock index.
Consultation will run until 31 December 2025, with a final decision expected on 15 January 2026, and the resulting exclusions will be implemented as part of the index review in February 2026.
Analysts crunched the numbers. JPMorgan, for example, estimates that removing its flagship DAT from MSCI indexes could cause forced passive outflows of approximately $2.8 billion, which could reach up to $8.8 billion if other large index providers adopt similar exclusions.
This is more than just a headline risk for cryptocurrencies. If MSCI and its peers move forward, index trackers, pension funds, and other passive vehicles will be forced to sell these stocks, not because they hate Bitcoin, but because their mandates and rulebooks require it. Going forward, DAT will no longer be eligible for passive index inclusion, just as funds and ETFs will not be eligible for index membership.
Flashpoint on October 10th
Following the chronology, the series of events around October 10th is as follows.
1. Macroshock: On October 10, President Trump announced 100% tariffs on all Chinese imports, along with new export restrictions on critical software. Global risk assets plunged, with tech stocks suffering their biggest single-day losses since April.
2. Cryptocurrency liquidation cascade: Cryptocurrencies, which were already heavily leveraged, were next to suffer. BTC and ETH plummeted, with over $19 billion of leveraged crypto positions liquidated in 24 to 48 hours, the largest liquidation in market history. In the process, the market capitalization of cryptocurrencies fell by hundreds of billions of dollars almost overnight.
3. Silent structural bomb: On the very same day, MSCI quietly announced the DAT consultation. Fees and leverage explain the intensity of the initial crash. MSCI’s document helps explain why the market has struggled to mount a meaningful rebound since then.
Why MSCI’s move is at the heart of this cycle
DAT is more than just “another cryptocurrency storybook stock.” DAT is the bridge between TradFi capital and digital assets. Passive funds, pension funds, and “index-only” allocators often cannot easily buy Bitcoin or other cryptocurrencies directly, but can own indexes that hold large amounts of DAT. That DAT can be acquired by leveraging its equity value through a new stock issue or debt.
Earn more Bitcoins and effectively turn traditional equity capital into increased BTC demand.
MSCI’s removal of DAT from its index could have significant impacts on capital markets and virtual currency markets, including:
1. Forced Sale: Billions of passive money will have to sell these stocks around the time of the February 2026 rebalance.
2. No new passive inflow: DAT loses a large reason to exist as its ability to accommodate larger and larger index inclusions diminishes.
3. Weak structural bids for BTC: DAT restrictions undermine one of the primary leveraged buyers of the underlying asset, Bitcoin.
The smart money in the market must have seen this coming. Market sentiment and behavior following the October 10th event changed accordingly. Any decline is now measured against a known future overhang. Why invest max-long in an asset that one of the largest marginal buyer groups might be forced to sell within a few months?
This may not have caused the initial crash, but it completely changed the market’s appetite for bullish buying.
Why the market can’t find a meaningful rebound
Since the crash, three forces have worked together to keep the market under pressure.
First, there are obvious headwinds. This is a macro headwind. Concerns about rising interest rates, resurgent trade war risks, and growing risk-off trends have made TradFi allocators cautious and reluctant to add risk. Second, buyers are exhausted. Retail investors were hit hard by October’s liquidations and are slow to recover, while ETF flows have cooled, with weeks of outflows replacing the relentless inflows that characterized the early stages of the cycle. Third, DAT uncertainty is ongoing.
expensive. Almost every analyst report now points to MSCI’s Jan. 15 decision as a critical risk for Bitcoin and other digital asset bonds, with the prospect of potential passive outflows of $2.8 billion to $8.8 billion hanging over the sector.
Therefore, there is a market where sellers are willing to hedge, avoid risk, and lock in tax losses. Meanwhile, new structural buyers are holding back, waiting for clarity on indexes, tariffs and Fed policy. And DAT, the old structure purchaser, is under threat. As a result, the market has created an intraday surge followed by a supply wall with no sustained upward trend.
Two possible paths may emerge
The story now converges on MSCI’s decision date of January 15, 2026, from which two major paths emerge.
Negative outcomes are likely to hurt Bitcoin and broader digital asset sentiment, as DAT is classified as a “fund” and removed from major indexes, active managers and arbitrageurs are at the forefront of passive flows, prompting a fire sale of pre-positioning into the February screening slot, forced selling of DAT shares as index tracker rebalancing, and structurally weakening one of the major TradFi launches.
This does not automatically cause a multi-year bear market, but
Some of the easiest means of supporting digital asset prices through listed equity structures will be removed, potentially leaving a more vulnerable spot and derivatives-driven market in the short term.
A positive or more benign outcome could be that MSCI decides not to exclude DAT or to adopt a more nuanced framework that keeps DAT as a core benchmark. In that scenario, the overhang would disappear, DAT would regain its role as a scalable vehicle for BTC exposure, and the narrative could shift from “index banishment” back to “index-driven adoption.” When combined with improvements in the macro environment and ETF flows, that setup could facilitate a strong relief rally.
Either way, MSCI has turned what was a niche microstructural issue into a macro event for the entire cryptocurrency complex.
What should crypto investors take away from this?
For crypto investors, several lessons stand out. The October 10th crash was not just a “cryptocurrency problem.” This was part of a broader macro shock driven by tariff headlines and then amplified by leverage. On the very same day, MSCI quietly changed the structural equation of one of the largest groups of buyers of cryptocurrencies. Although the change does not appear on the on-chain chart, it is very important for capital flows.
From now until mid-January, every fall or rise in DAT stock and BTC itself will play out in the shadow of MSCI’s decision. Above all, cryptocurrencies are not isolated. What were once considered boring TradFi details, such as index rules, tariff policies, and ETF flows, can suddenly become the main story.
The essence and future of DAT and DAC
The October 10th crash was the moment when the market realized two things at once. One is that macro events can still destroy cryptocurrencies, and that tariffs and policy shocks really matter. Second, the current market structure is more fragile than many assume. This is because when the index system turns against DAT, one of the core engines of the cycle stalls. This explains why we don’t see a clean V-shaped recovery. The liquidation event has ended. Structural issues are not.
If MSCI’s January decision is negative, we can expect further turmoil due to a forced sell-off in market prices and weakening of the DAT flywheel. If it is positive, the overhang will be lifted and the bullish narrative will likely gain new adrenaline.
However, in the worst case scenario, this will not stop the DAT model. It simply reorders the incentives and creates a new category of DAT. Rather than pursuing index inclusion and balance sheet size through leverage and financial engineering, DAT will need to focus on creating substantial incremental value in the underlying asset ecosystem and capturing a share of that value for its shareholders. Listed vehicles use access to public capital to
We build products and services that solve real problems, leverage our digital assets, and support the growth of the broader ecosystem. A rough historical parallel is the way ConsenSys operated around Ethereum in its early days. Under this approach, the narrative evolves from a digital asset treasury to a digital asset company (DAC).
In any case, October 10th was no accidental collision. This was the day the market discovered that the “numbers go up” machine itself may be up for an overhaul, signaling a fundamental shift in the way the crypto industry operates and integrates with TradFi.
