Cryptocurrencies have been broken for weeks.
On October 10th, we had the largest liquidation event in market history. Bitcoin takes a nuclear strike. ETH and alts fell even more. Since then, every “bounce” has resulted in death from contact.
Everyone accuses US President Donald Trump of imposing 100% tariffs on China, macroeconomics, or excessive leverage. All of these are valid explanations for why the market crashed, but they fail to explain why the market continued to languish over the next few weeks.
The missing piece appears to be a quiet document released on the same day by Morgan Stanley Capital International (MSCI), the world’s second-largest index provider. It takes direct aim at the structures that helped drive this cycle: digital asset treasuries (DATs) like Michael Thaler Strategies (NASDAQ: MSTR ) and others.
In short, October 10th is more than just “Tariff Day.” It was also the day the market discovered that one of its largest groups of marginal buyers could become structurally paralyzed by early 2026.
What is DAT? Why are they so important?
DATs are publicly traded companies whose primary business is to hold Bitcoin or other digital assets on their balance sheets: think of strategic vehicles that raise equity or debt on traditional markets and use those funds to purchase other tokens such as BTC or Ethereum, thereby providing investors with a leveraged, publicly listed proxy for digital assets.
Since the first DAT emerged in 2020, with MicroStrategy’s first purchase of 21,454 Bitcoins in August of that year, DAT has become one of the two largest structural buyers of digital assets this cycle. These buyers fall into two categories: spot BTC (or other digital asset) ETFs and related passive instruments, and DATs that repeatedly issue shares or convertible bonds or use other forms of financing to acquire additional digital assets.
Crucially, DAT has always benefited from the exponential inclusion game through a series of self-reinforcing events. When DAT grows large enough, it is automatically included in MSCI and other major benchmark indexes, which forces passive index funds to buy shares of DAT to replicate the index composition. This index-driven demand puts additional buying pressure on stocks, driving up prices and market caps.
The higher market capitalization generated by this passive purchase also increases liquidity and legitimacy, giving DAT greater ability to raise more funds (via stock issuances, convertible bonds, or other financing) and use the proceeds to purchase more digital assets, further expanding its holdings and market capitalization. In turn, DAT’s increased market capitalization translates into greater index weighting, thereby attracting more passive flows.
The result is a powerful flywheel effect: index inclusion leads to passive capital inflows, thereby increasing market value and index weight, thereby expanding financing capabilities and digital asset purchases, thereby feeding back more index demand. Companies like Strategy are taking advantage of this mechanism.
However, MSCI said last month it may reconsider how such DATs are treated in the index, effectively “cutting off momentum.”
What MSCI announced on October 10
On October 10, 2025, MSCI issued an advisory report titled “Digital Asset Treasury Companies”, recommending that companies whose main business is holding Bitcoin or other digital assets be reclassified as fund-type vehicles rather than operating companies. Under the proposal, a company could be excluded if its holdings of digital assets account for 50% or more of its total assets.
MSCI’s major stock indexes.
Consultation will continue until 31 December 2025, with a final decision due on 15 January 2026, and any resulting exclusions will be implemented as part of the index review in February 2026.
Analysts have crunched the numbers. For example, JPMorgan estimates that removing flagship DAT from MSCI indexes could trigger forced passive outflows of about $2.8 billion, rising to $8.8 billion if other major index providers adopt similar exclusions.
This isn’t just a brief 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 don’t like Bitcoin, but because their mandates and rulebooks require Bitcoin. Going forward, DATs will not be eligible for passive inclusion in the index, just as funds and ETFs are not eligible for index membership.
The breaking point on October 10
If we look at the timeline, the sequence of events around October 10th is as follows:
1. Macro impact: On October 10, Trump announced a 100% tariff on all Chinese imported products and implemented new export controls on key software. Global risk assets plummeted, with technology stocks suffering their biggest one-day decline since April.
2. Cryptocurrency Liquidation Cascade: Cryptocurrencies that were already highly leveraged were hit next. BTC and ETH sold off sharply, with more than $19 billion in leveraged cryptocurrency positions liquidated within 24 to 48 hours, marking the market’s largest-ever losses. In the process, hundreds of billions of dollars were wiped out of total cryptocurrency market capitalization almost overnight.
3. Quiet structural bombshell: On the same day, MSCI quietly issued a DAT advisory. Tariffs and leverage explain the severity of the initial crash; MSCI filings help explain why the market has struggled to stage a meaningful rebound since.
Why MSCI’s move strikes at the heart of this cycle
DATs are not just “another crypto narrative stock” – they are the bridge between TradFi Capital and digital assets. Passive funds, pension funds and “index-only” allocators generally cannot easily buy Bitcoin and other cryptocurrencies directly, but they can own an index that in turn holds a large amount of DAT. DAT can then leverage the value of its equity through new equity issuance or debt to purchase
More Bitcoins, effectively converting traditional equity capital into incremental Bitcoin demand.
If MSCI excludes DAT from the index, it may have the following main impacts on the capital and crypto markets:
1. Forced Sell: Billions of dollars of passive funds must sell these stocks around the February 2026 rebalancing.
2. No new passive inflows: As the index’s ability to include larger scale declines, DAT loses its primary reason for existing.
3. Weakened structural bids for BTC: As DAT is restricted, one of the major leveraged buyers of underlying Bitcoin is compromised.
The smart money in the market must have foreseen this, and market sentiment and behavior changed accordingly after the events of October 10th: every dip is now evaluated against the known future pending. Why go max-long on an asset when your largest group of marginal buyers may be forced to sell in a few months?
While this may not have caused the initial plunge, it definitely changed the market’s appetite for bargain hunting.
Why the market can’t find a meaningful rally
Since the crash, three forces have combined to keep the market under pressure.
First, the obvious: macro headwinds. Rising interest rate concerns, renewed trade war risks, and a broader risk-off tone have TradFi allocators cautious about adding risk. Second, buyers are exhausted. Retail investors were hit hard by October’s liquidations and have been slow to re-engage, while ETF flows have cooled, with weeks of outflows replacing sustained inflows in the early stages of the cycle. 3. DAT uncertainty is running
High. Now, nearly all analyst reports are labeling MSCI’s January 15 decision as a key risk for Bitcoin and other digital asset treasury stocks, while the prospect of potential passive outflows of $2.8 to $8.8 billion hangs like a dark cloud over the sector.
So we have a market where sellers are proactive, hedging, reducing risk and locking in tax losses; while new structural buyers are hesitant, waiting for clarity on indexes, tariffs and Fed policy; and the old structural buyers, DAT, are under threat. The result is a market that sees wild intraday swings, followed by a wall of supply and no sustained upward trend.
Two possible paths may arise
The story now focuses on January 15, 2026, MSCI’s decision day, from which two broad paths emerge.
In the event of negative results, DAT is classified as a “fund” and excluded from major indexes, leading to pre-emptive selling in the February review window as active fund managers and arbitrageurs get ahead of passive flows, DAT stock is forced to sell off as index trackers rebalance, and Bitcoin and broader digital asset sentiment could take a hit as one of its main TradFi entrances is structurally weakened.
While this may not automatically trigger a multi-year bear market, it
Some of the simplest levers to support digital asset prices through listed shareholding structures may be removed, leaving a more fragile spot- and derivatives-driven market in the short term.
If the results are positive or more muted, MSCI may decide not to exclude DAT, or adopt a more nuanced framework that would keep it in the core benchmark. In this scenario, the open questions disappear, DAT regains its role as a scalable instrument for BTC exposure, and the narrative can shift from “index in exile” to “index-driven adoption”; coupled with an improvement in the macro environment or ETF flows, this scenario could drive a strong relief rally.
Regardless, Morgan Stanley Capital International (MSCI) has transformed what was once a niche microstructural issue into a macro event for the entire cryptocurrency complex.
What cryptocurrency investors should take away from this
There are some lessons for cryptocurrency investors. The Oct. 10 crash was not just a “crypto event”; it was part of a broader macro shock triggered by tariff headlines and then amplified by leverage. On the same day, Morgan Stanley Capital International quietly changed the structural equation of one of the largest buyer groups of cryptocurrencies. Although this shift does not appear in the on-chain chart, it is very important for capital flows.
Every dip and every rise in DAT stock and BTC itself between now and mid-January will occur in the shadow of the MSCI decision. The bottom line is that cryptocurrencies don’t exist in a vacuum: index rules, tariff policies and ETF flows, which are considered boring TradFi details, can suddenly become major plot points.
The bottom line and future of DAT and DAC
The crash on October 10 made the market realize two things immediately: first, macro events can still have a negative impact on cryptocurrencies, and tariffs and policy shocks do matter; second, the current market structure is more fragile than many thought, because if the index system moves against DAT, one of the core engines of this cycle will stall, which explains why we do not see a clean V-shaped recovery. The liquidation exercise is over; the structural issues are not.
If MSCI’s January decision is negative, expect more volatility in market prices due to forced selling and a weakening of the DAT flywheel. If positive, the pending rally and bullish narrative will likely get the adrenaline pumping again.
However, even in the worst case, this will not kill the DAT model. It simply rearranges incentives and creates a new DAT category. Instead of pursuing index inclusion and balance sheet size through leverage and financial engineering, DATs need to focus on creating real incremental value for the underlying asset ecosystem and capture a portion of the value for their shareholders. Public companies can take advantage of their access to public capital
Build products and services that solve real problems, put their digital assets to work, and support the development of the broader ecosystem. A loose historical analogy is the way Consensys worked around Ethereum in its early days. Under this approach, the story evolved from a digital asset treasury to a digital asset company (DAC).
Regardless, October 10 was not a random accident. On this day, the market discovered that the “digital rise” machine itself may be coming under scrutiny, suggesting some fundamental shifts are taking place in the way the crypto industry operates and integrates with TradFi.