MicroStrategy reports loss on bitcoin holdings, but actually it earned $4 billion

abdelaziz Fathi

Nasdaq-listed business intelligence firm MicroStrategy, spearheaded by one of bitcoin’s most vocal proponents, has posted a cumulative impairment loss of $754.7 million on its cryptocurrency holdings.

As of the end of 2021’s third quarter, MicroStrategy holds about 114,042 bitcoins, which were acquired at an average price of nearly $27,713 per unit.

The world’s biggest corporate holder of bitcoin witnessed paper losses from holding digital assets on its books. However, this loss is something that has not yet been realized as it just reflects a depreciation in fair market value in excess of the book value.

Under the US generally accepted accounting principles, or GAAP, the original cost of MicroStrategy’s digital assets was $3.160 billion. But at the current price, the company’s bitcoins are worth more than $7.09 billion. This means that MicroStrategy would make nearly $4 billion in profit if all BTC holdings are sold today.

Overall, the Virginia-based corporation reported a net loss of $36.1 million in Q3 2021, or $3.61 per share, compared to a $14.2  million loss a year earlier.

In a sign of massive interest from investors, Microstrategy CEO said his company is doubling down on its cryptocurrency bet and will continue to acquire additional bitcoins. Going forward, Michael Saylor said the firm intends to continue to deploy additional capital into their digital asset strategy, noting the firm purchased nearly 9,000 bitcoins (worth roughly $560 million) in the third quarter.

The latest crypto purchase was made in September for around $243 million in cash at an average price of $48,099 apiece, inclusive of fees and expenses. It was financed with the proceeds generated from a sale of MicroStrategy’s class A common stock.

“MicroStrategy delivered strong third quarter results that demonstrated successful execution on both our operational and digital asset strategies. Overall demand for the MicroStrategy platform continued to increase, and we are pleased with the growing interest and adoption of our cloud solutions. Today, MicroStrategy is the world’s largest publicly traded corporate owner of bitcoin with over 114,000 bitcoins. We will continue to evaluate opportunities to raise additional capital to execute on our bitcoin strategy,” he added.

MicroStrategy has good reason to do that again. The publicly-listed company’s share price shot up as its Bitcoin bet had turned into a profitable one. The price of Bitcoin rose from $11,000 in August 2020, when it made its first crypto purchase via Coinbase’s institutional service, to more than $66,000 earlier this month.

In 2020, the company bought an aggregate of 70,470 bitcoins, which were acquired at an aggregate cost of $1.1 billion or an average purchase price of $15,964 per coin, well below current levels.

MicroStrategy CEO Saylor was said to be the one who convinced Elon Musk to move $1.5 billion dollars of Tesla’s funds into bitcoin.

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