Despite a $424.8 million “paper” loss on Bitcoin, MicroStrategy will keep buying more of the asset
Business intelligence firm MicroStrategy are destined to buy more Bitcoin despite reporting “paper” losses of $424.8 million in Q2 of this year.
The almost half a billion USD in losses are not considered a realized loss and is based on the price of Bitcoin at the end of the quarter. MicroStrategy have still made nearly a billion dollars on Bitcoin since it had started purchasing the cryptocurrency in 2020.
In their Q2 earnings report that was announced on Thursday, MicroStrategy’s course showed to be unaffected:
“We continue to be pleased by the results of the implementation of our digital asset strategy. Our latest capital raise allowed us to expand our digital holdings, which now exceed 105,000 bitcoins. Going forward, we intend to continue to deploy additional capital into our digital asset strategy.”
As of June 30, 2021, MicroStrategy holds approximately 105,085 BTC with a carrying value of $2.051 billion, at an impairment loss of $689.6 million since acquisition. The average carrying amount per Bitcoin was an estimated $19,518.
MicroStrategy recorded total operational revenues for the second quarter of $125.4 million, which was a 13.4% increase compared to Q2 of 2020. MicroStrategy’s Gross profit equated to $102.3 million and represented a gross margin of 81.6%, which was a minor increase of 4.2% compared to the year prior. Overall, considering the impairment loss of their BTC reserves, MicroStrategy reported a second-quarter loss of $299.3 million. A year ago, the company jotted down a $3 million profit in the same quarter.
Accounting rules are clear. While companies are not required to report price appreciation in the specified asset until the position is realized through a sale, they are required to report an impairment loss when the asset’s price drops below its cost basis.
MicroStrategy are all-in on Bitcoin, powered by CEO Michael Saylor’s strong belief appear in the crypto asset. Two weeks ago in a podcast with Natalie Brunell, Saylor had said that MicroStrategy, will ‘hodl’ through periods of market downturn and FUD. He emphasized that the company is prepared for further volatility in the future and it has no intention to sell, even if Bitcoin crashes in the short term.
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Author: Peter Siu