For several weeks, the crypto market has appeared unsettled.
We experienced the largest liquidation event in market history on October 10th. Bitcoin plummeted. ETH and altcoins suffered even steeper declines. Since that time, any “bounce” quickly fizzled out.
Many pointed fingers at U.S. President Donald Trump’s 100% tariffs on China, macroeconomic factors, or excessive leverage. While these explanations are legitimate for the crash, they do not clarify the market’s ongoing depressed state in the weeks that followed.
The crucial element may lie in a quietly released document from MSCI, the world’s second-largest index provider, published on the same day. It specifically addresses the structures that fueled this cycle: Digital Asset Treasury companies (DATs) like Michael Saylor’s Strategy (Nasdaq: MSTR) and others.
Simply put, October 10th was not merely “tariff day.” It also marked the moment the market realized that one of its largest marginal buyer groups might be structurally impaired by early 2026.
What are DATs and why are they significant?
DATs are publicly traded companies primarily engaged in holding bitcoin or other digital assets on their balance sheets: think Strategy-style vehicles that raise equity or debt in traditional markets and use that capital to acquire BTC or other tokens like Ether, providing investors with a leveraged, publicly-listed digital asset proxy.
Since the emergence of the first DAT in 2020, starting with MicroStrategy’s initial acquisition of 21,454 bitcoins in August of that year, DATs have become one of the two major structural buyers of digital assets in this cycle, classified into two groups: spot BTC (or other digital asset) ETFs and related passive vehicles, along with DATs that frequently issue stock or convertibles or use other financing methods to acquire further digital assets.
Importantly, DATs have thrived due to the index inclusion dynamics, creating a self-reinforcing cycle. As a DAT grows substantial enough, it is automatically incorporated into MSCI and other significant benchmarks, compelling passive index funds to buy the DAT’s stock to replicate the index composition. This ensuing demand from the indexes instigates additional buying pressure for the shares, elevating the price and market capitalization.
The increased market cap resulting from this passive purchasing also enhances liquidity and perceived legitimacy, enabling the DAT to raise further capital (through equity offerings, convertibles, or other financing) to acquire additional digital assets, which in turn bolsters its holdings and market cap. The augmented market cap translates into a larger weight in the index, attracting even more passive flows.
The outcome is a powerful flywheel: index inclusion results in passive inflows, boosting market cap and index weight, subsequently enhancing fundraising capacity and digital asset procurement, feeding back into further index demand. Firms such as Strategy leverage this mechanism.
However, last month MSCI indicated it might effectively “cut the power” to this flywheel by reevaluating the treatment of DATs in their indices.
What MSCI revealed on October 10th
On October 10, 2025, MSCI released a consultation titled “Digital Asset Treasury Companies,” suggesting that companies whose core business involves holding bitcoin or other digital assets be reclassified as fund-like vehicles instead of operating companies. According to the proposal, if a company’s digital asset holdings constitute 50% or more of its total assets, it could be excluded from
MSCI’s main equity indexes.
The consultation will remain open until December 31, 2025, with a final decision slated for January 15, 2026, and any resulting exclusions expected to take effect during the February 2026 index review.
Analysts have calculated the potential impact. For instance, JPMorgan assesses that removing a flagship DAT from MSCI indices could incite around $2.8 billion of forced passive outflows, with numbers potentially escalating to $8.8 billion if other major index providers follow suit.
This represents more than a fleeting headline risk for the crypto market. Should MSCI and its counterparts proceed, index trackers, pension funds, and other passive vehicles will be compelled to liquidate these stocks, not out of disdain for bitcoin, but due to their mandates and regulations. Furthermore, going forward, DATs would no longer be eligible for passive index inclusion, just as funds and ETFs are not considered index constituents.
The pivotal moment on October 10th
If we analyze the timeline, the series of events surrounding October 10th unfolds as follows:
1. Macro shock: On October 10th, Trump declared 100% tariffs on all Chinese imports, accompanied by new export controls on critical software. Global risk assets plummeted, with tech stocks facing their most significant one-day decline since April.
2. Crypto liquidation cascade: Crypto, already heavily leveraged, bore the brunt next. BTC and ETH experienced sharp declines, and over $19 billion in leveraged crypto positions were liquidated within 24 to 48 hours, marking the largest market wipeout to date. During this process, total crypto market capitalization evaporated by hundreds of billions of dollars almost instantaneously.
3. Quiet structural upheaval: On the very day of this turmoil, MSCI subtly published its DAT consultation. The tariffs and leverage elucidate the severity of the initial crash; the MSCI document provides insight into why the market has struggled to regain solid footing since then.
The significance of MSCI’s move for this cycle
DATs are not merely “another crypto narrative stock” — they serve as a bridge between traditional financial capital and digital assets. Passive funds, pension funds, and “index-only” allocators typically cannot easily purchase bitcoin and other cryptocurrencies directly, but can invest in an index that holds a significant DAT. That DAT, in turn, can leverage its equity value through new share issuance or debt to acquire more bitcoin, effectively transforming traditional equity capital into incremental BTC demand.
If MSCI excludes DATs from indices, several critical impacts could arise in capital and crypto markets:
1. Forced liquidation: billions of dollars in passive assets must offload these stocks during the February 2026 rebalance.
2. Absence of new passive inflows: DATs would lose a significant rationale for their existence, as their ability to leverage index inclusion for growth diminishes.
3. Weaker structural bid for BTC: with DATs constrained, one of the main leveraged buyers of bitcoin faces impairments.
Astute market participants likely anticipated this outcome, and sentiment and behavior in the market have been reflective since October 10th: every dip is now scrutinized against a known future challenge. Why go fully long on an asset where one of the largest marginal buyer groups might need to liquidate in a few months?
While this may not have triggered the initial crash, it has certainly altered the willingness of the market to buy the dip.
Challenges in finding a meaningful recovery
Since the market crash, three forces have combined to sustain downward pressure.
First, there are the evident macro headwinds. Fears of rising rates, renewed trade-war tensions, and a general risk-off sentiment have rendered traditional financial allocators cautious and reluctant to increase their exposure. Second, potential buyers are exhausted. Retail investors who suffered during the October liquidation have been slow to re-enter, while ETF flows have experienced a decline, with several weeks of outflows replacing the consistent inflows that characterized the previous phase of the cycle. Third, uncertainty surrounding DATs remains high. Almost every analyst report now flags MSCI’s January 15th decision as a critical threat for bitcoin and other digital-asset treasury shares, with the prospect of $2.8 to $8.8 billion in potential passive outflows overshadowing the sector.
As a result, we have a market where sellers are actively motivated, employing hedging strategies, de-risking, and realizing tax losses; new structural buyers are hesitant, awaiting clarity on index changes, tariffs, and Federal Reserve policies; while the legacy structural buyers, the DATs, face significant threats. This combination produces sharp intraday spikes followed by substantial selling, with no clear upward trend persisting.
Two potential scenarios
The narrative now converges on January 15, 2026, MSCI’s decision date, from which two broad scenarios arise.
In a negative scenario, DATs are classified as “funds” and excluded from major indices, leading to pre-positioning sell-offs leading into the February review as active managers and arbitrage traders front-run the passive flows, ensuing forced liquidation of DAT stocks as index trackers adjust, and a likely blow to bitcoin and broader digital-asset sentiment as a key avenue of traditional finance is structurally jeopardized.
Although this situation may not automatically trigger a multi-year bear market, it
could diminish some of the most straightforward mechanisms to underpin digital-asset prices via listed equity structures, rendering the market more vulnerable and driven by spot and derivatives in the short term.
In a positive or moderate outcome, MSCI may opt not to exclude DATs or adopt a more nuanced approach that maintains their inclusion in core benchmarks. In this case, the overhang dissipates, DATs regain their role as scalable platforms for BTC exposure, and the narrative could shift from “index exile” back to “index-driven adoption”; combined with any improvements in macroeconomic conditions or ETF flows, this scenario could ignite a powerful relief rally.
Regardless, MSCI has transformed what was once a niche micro-structure issue into a macro event affecting the entire crypto ecosystem.
Key takeaways for crypto investors
For crypto investors, several lessons emerge. The crash on October 10th was not merely a “crypto event”; it was rooted in a broader macroeconomic shock instigated by tariff news and then magnified by excessive leverage. On that same day, MSCI discreetly shifted the structural landscape for one of crypto’s largest buyer groups, and while this shift may not become apparent in on-chain data, it holds immense significance for capital flows.
In the period leading up to mid-January, each dip and rally in DAT stocks and BTC will unfold under the shadow of MSCI’s decision. Ultimately, crypto does not exist in isolation: index protocols, tariff policies, and ETF flows—those ostensibly mundane traditional finance details—can unexpectedly emerge as the central narrative.
Conclusion: The future of DATs and DACs
The October 10th crash represented the moment the market acknowledged two critical realities: firstly, macro events can still significantly impact crypto, alongside the relevance of tariffs and policy changes; and secondly, the current market framework is more fragile than many assumed, as a hostile index system could cripple DATs, jeopardizing a central catalyst of this cycle, explaining the absence of a clean V-shaped recovery. The liquidation event has concluded, but the structural dilemma endures.
Should MSCI’s January decision lean negative, prepare for further turbulence as the market accounts for forced selling and a weakened DAT mechanism. Conversely, a positive decision could alleviate concerns, revitalizing the bullish narrative.
Nevertheless, in even the worst-case scenario, this wouldn’t dismantle the DAT model; it would merely reorder incentives, leading to a new category of DAT. Rather than pursuing index inclusion and balance-sheet expansion through leverage and financial engineering, DATs would focus on creating genuine incremental value for the underlying asset ecosystem, capturing a share of that value for their shareholders. Listed entities could leverage their access to public capital to develop products and services addressing real challenges, effectively utilizing the digital assets in their possession, and promoting broader ecosystem growth. A historical parallel could be drawn with Consensys during Ethereum’s early period. Consequently, the narrative would evolve from Digital Asset Treasuries to Digital Asset Companies (DACs).
In conclusion, October 10th was not a mere coincidental crash; it was the day the market recognized potential vulnerabilities in the “number go up” paradigm, signaling forthcoming fundamental shifts in how the crypto sector interacts with traditional finance.
