Index freeze kills the ‘infinite money’ loop for Bitcoin-treasury stocks

MSCI kept the stocks — but pulled the lever that fed them

Good news first: the big index provider decided not to boot digital-asset-heavy companies out of its global benchmarks. Bad news immediately after: it slapped an invisible lid on their share counts. In plain English, these companies remain in the index, but the automatic plumbing that forced passive funds to buy newly issued stock has been shut off.

Until now, some treasury-style companies could issue new shares to buy more Bitcoin (or whatever shiny thing they were after) and count on index trackers to swoop in later and buy a proportional slice. That created a predictable, price-insensitive buyer — a financial flywheel that soaked up dilution. The new rule freezes the number of index-eligible shares, so increases in a company’s float won’t change its index weight and won’t trigger forced buys by ETFs or passive funds.

Why this matters: the upside is gone, the downside is still real

Think of it like a safety-net swap: the threat of a doom-sell from index expulsion is gone, but so is the gravy train that helped these firms dilute without getting crushed. Without the structural bid, companies that used equity issuance as a cheap way to buy Bitcoin now face a much rockier path when they try to raise capital.

Analysts have been modeling the size of the missing bid. In one hypothetical: a company with 200 million shares outstanding, roughly 10% held by passive index trackers, issues 20 million new shares. Under the old mechanics, passive funds would eventually be nudged into buying about 2 million of those new shares. At a $300 share price, that’s $600 million of automatic buying pressure. With the freeze, that $600 million of guaranteed demand disappears.

What does that mean in practice? Issuers now need real buyers — private investors, hedge funds, or retail — or they must sell at steeper discounts, issue less, or find other financing. The comfortable arbitrage of ‘‘print equity, buy crypto’’ loses a big part of its math. If a company tries to replicate massive share issuance without passive support, the risk of a sharp price correction during dilution events goes up substantially.

The competitive landscape is shifting too. If raising cheap capital through equity markets becomes harder for these operating companies, big allocators may prefer spot Bitcoin ETFs or other fee-bearing products that give exposure without corporate-operation risk. That would funnel more money to traditional asset managers and ETF issuers and away from the corporate “treasury” route.

Short version: the floor has been moved. Firms stay in the index, but the invisible backstop that made their dilution tolerable is gone. The trade that looked like an endless printing press is no longer automatic — now it depends on real appetite, real discounts, and real risk.