• Despite a $424.8 million loss on its BTC holdings in Q2, MicroStrategy promises to buy more

  • Despite announcing $424.8 million in impairment losses in the second quarter, business analytics and mobile software giant MicroStrategy has committed to buy more Bitcoin.

    However, this is merely a paper loss based on the price of Bitcoin at the conclusion of the quarter, not a realized loss. MicroStrategy appears to have made roughly a billion dollars more from Bitcoin than it spent, depending on how the numbers are added up.

    That, together with CEO Michael Saylor’s ardent confidence in Bitcoin, may explain why the company has resolved to add additional Bitcoin to its reserves in the future. According to the report:

    “The results of our digital asset strategy implementation continue to please us. Our most recent round of funding allowed us to increase our digital holdings, which currently total more than 105,000 bitcoins. We want to continue to invest more money in our digital asset strategy in the future.”

    The second-quarter report was released earlier today. MicoStrategy had about 105,085 BTC with a carrying value of $2.051 billion as of June 30, 2021, with an impairment loss of $689.6 million since acquisition. The average Bitcoin carrying amount was expected to be $19,518.

    Elon Musk’s Tesla also released a Q2 report earlier this week, which revealed a $23 million impairment loss on its Bitcoin holdings.

    Because both companies classify Bitcoin as an “intangible asset,” they must disclose an impairment loss if the asset’s price falls below its cost basis. They are not, however, required to report price appreciation in the selected asset until the position is sold.

    Generally Accepted Accounting Principles (GAAP) – a set of universally accepted accounting regulations used for financial reporting — were utilized to determine the digital asset statistics. The firm also offered non-GAAP estimates, which omit the “effect of share-based compensation expense, impairment losses, and profits on the sale of intangible assets” in this report.

    The non-GAAP data for MicroStrategy’s digital asset holdings paint a different image, with the BTC cost basis at $2.741 billion but a market value of $3.653 billion, based on an average cost per BTC of $26,080 and a market price of $34,763 as of June 30.

    Total sales for the second quarter were $125.4 million, up 13.4 percent from the second quarter of 2020. Microstrategy’s gross profit was $102.3 million, representing an 81.6 percent gross margin, a little increase of 4.2 percent over the previous year. MicroStrategy reported a $299.3 million loss in the second quarter, compared to a $3 million profit in the same time the previous year.

    At this point, Saylor and MicroStrategy appear to be all-in on Bitcoin, and both have continued to accumulate the asset despite the crypto downturn that began in May, as the plan is to keep the commodity for the long term. However, the CEO recently stated that if the price of Bitcoin is lower in four years than it is now, he will reassess his plan.

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