MicroStrategy buys more bitcoins as crypto bet loses +$600M

abdelaziz Fathi

MicroStrategy has purchased another 5,445 bitcoins for approximately $147.3 million in cash, adding to its massive cryptocurrency holdings during a sharp drop in the price.

Microstrategy CEO

The Virginia-based business intelligence firm had added more bitcoins to its strategic reserves at an average cost of $27,053 per coin, inclusive of fees and expenses. MicroStrategy made its Bitcoin purchases between August 1 and September 24. To finance these acquisitions, the company partially relied on the issuance of new stock.

The analytics software maker, led by bitcoin bull Michael Saylor, has taken advantage of any price drop in Bitcoin to continue beefing up its investment in the world’s most-traded cryptocurrency.

This strategy, however, turned out to be a risky gamble. By the end of Q1 2022, MicroStrategy’s Bitcoin holdings were valued at approximately $5.9 billion. However, since then, the value has declined by around 22%. Throughout its venture into Bitcoin starting in 2020, MicroStrategy’s stock price has frequently mirrored the fluctuations in Bitcoin’s price.

In July 2020, prior to MicroStrategy’s Bitcoin buying spree, the company’s shares traded at approximately $123. The stock reached its peak of $1,272 in February 2021. As of Monday morning, the stock was trading around $326.

With its most recent purchase, MicroStrategy holds an aggregate of 158,245 bitcoins, which the company acquired at cost of around $4.68 billion and an average purchase price of approximately $29,582 apiece.

Microstrategy is back underwater on its bold bet on Bitcoin as the world’s largest publicly traded crypto holder is trading under $26,280 level. With Bitcoin down 15% off its yearly peak it hit in July at $31.470, MicroStrategy’s Bitcoin investment yields more than $600 million in paper loss.

MicroStrategy (MSTR) is set to change how it reports its bitcoin (BTC) holdings each quarter, as the Financial Accounting Standards Board (FASB) has voted to alter the crypto reporting rules.

Overall, the move is seen as a positive step for the crypto market and will provide investors with more transparency. Currently, cryptocurrencies are treated as intangible assets, resulting in conservative accounting that dings company earnings when crypto prices drop.

The new changes will allow MicroStrategy to avoid recognizing impairment losses if the price of bitcoin drops during a quarter. Since initiating its bitcoin acquisition strategy in August 2020, the Virginia-based business intelligence firm has reported $2.23 billion in cumulative impairment losses. The largest impairment loss of $917.8 million was recorded in the second quarter of 2022.

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