• Bitcoin has declined below $85,000 for the first time since April.
• The drop comes amid a combination of macroeconomic and institutional factors, including uncertainty over Fed rate cuts and selling from BTC treasuries.
• Strategy's BTC average cost basis of $74,000 could serve as a final bottom for the top crypto.

Bitcoin's (BTC) decline has been sustained by three fundamental factors, including uncertainty around a December rate cut by the US Federal Reserve (Fed), increased selling from digital asset treasuries (DATs) and growing concerns over Strategy's removal from the MSCI.

Bitcoin's crash extends worries as prices drop below $85,000

Bitcoin has sustained its decline below the $90,000 zone, dropping to $85,000 after a 2% decline over the past 24 hours at the time of publication on Friday. The top crypto is down over 20% in November alone amid lingering risk-off sentiment across risk assets.

The decline was amplified by the release of the delayed US jobs data for September on Thursday, which is a major yardstick for the Federal Reserve's rate cut decisions.

The employment data, at the time, strengthened bets that the Fed may halt its recent rate-easing path at its December meeting, further weakening investor confidence in risk assets. The move accelerated outflows in US spot Bitcoin exchange-traded funds (ETFs) on Thursday, totalling $903 million, led by BlackRock's IBIT, which shed $355 million.

However, rate cut expectations jumped back above 70% on Friday after Fed officials John Williams and Stephen Miran signalled they would favour an easing path in the upcoming December meeting, providing a short-term relief.

Bitcoin treasuries are a key player in the downtrend

Bitcoin's recent downturn has also been reinforced by DATs' selling of the top crypto to conduct share buybacks. A majority of their share prices have plunged below their net asset value (NAV), prompting asset sales to close the gap.

At the same time, some institutional flows reported as long BTC positions earlier in the year may not reflect straightforward bullish bets. With several DATs trading at elevated premiums and market enthusiasm peaking earlier in the year, most investors adopted a long-short strategy, shorting Strategy (MSTR) and other DATs while holding Bitcoin through spot ETFs.

However, with many unwinding their bets after recording huge gains — the primary being short trader Jim Chanos — their operations have put downward pressure on the top crypto, K33 noted in a Friday report.

Strategy is also adding to the market uncertainty as it faces potential removal from the MSCI USA Index and several other major equity benchmarks under newly proposed MSCI rules. JPMorgan analysts estimate the company could see $8.8 billion in outflows if it is removed from major stock indices.

MSCI, on October 10, began reviewing proposals to remove companies from its indices whose digital-asset holdings make up 50% or more of their total assets, a threshold that Strategy exceeds by a wide margin due to its Bitcoin-heavy balance sheet. The date coincides with the October 10 leverage flush, where the crypto market saw $19 billion in liquidations.

In response to a potential removal from these indices, Strategy CEO Michael Saylor stated in an X post on Friday that the company should not be categorized alongside funds, trusts, or holding companies. He emphasized that Strategy operates as a publicly traded software firm with roughly $500 million in annual business revenue, complemented by a treasury approach that treats Bitcoin as productive capital rather than a passive asset.

Saylor added that, unlike vehicles that hold investments, Strategy actively builds and manages products, describing the firm as a "Bitcoin-backed structured finance company" capable of innovating across both capital markets and enterprise software. He argued that this operational model sets the company apart from entities targeted under MSCI's proposed rules.

Despite Saylor's comment, BTC is about $10,000 shy of the average $74,000 cost basis of Strategy's Bitcoin holdings. According to Bitwise Europe research head André Dragosch in a Wednesday X post, the top crypto could see a final bottom between Strategy's average purchase price and the $84,000 average cost basis for BlackRock's IBIT.