MicroStrategy Buys Dip as Brutal Loss Revealed
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MicroStrategy Buys Dip as Brutal Loss Revealed

7 months ago

The publicly listed company has been an aggressive investor in the cryptocurrency since August 2020 — and the latest figures reveal that it holds 125,051 BTC in reserve.

MicroStrategy Buys Dip as Brutal Loss Revealed

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MicroStrategy has announced that it has snapped up another 660 BTC for approximately $25 million — a price per Bitcoin of about $37,878.
The publicly listed company has been an aggressive investor in the cryptocurrency since August 2020 — and the latest figures reveal that it holds 125,051 BTC in reserve.
Most of MicroStrategy's Bitcoin buys have been facilitated through the use of junk bonds. Some critics have raised concerns about this debt, and the potential implications if Bitcoin's price falls below $30,000.

Nonetheless, CEO Michael Saylor has repeatedly vowed that the company plans to hold on to its BTC no matter what happens — insisting that the digital asset remains a powerful hedge against inflation.

Drilling down into the numbers, and MicroStrategy's high-risk bet appears to be paying off so far. It's paid a total of $3.8 billion in cash for BTC so far, and at the time of writing it's worth $4.8 billion — up by 27.5% on paper.
But let's take a reality check here. When BTC was at all-time highs of $68,700 last November, this figure would have been above $8 billion, so the value of the investment has plunged substantially.
And while MicroStrategy's 2020 purchases have certainly proven lucrative, the average price paid for each Bitcoin in 2021 stood at $48,710 — a worrying trend reversal considering that BTC is currently trading $10,000 below that.

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What Q4 Figures Tell Us

MicroStrategy's status as a publicly listed company means that it needs to inform the U.S. Securities and Exchange Commission whenever Bitcoin is purchased — and offer shareholders an insight into the performance of its crypto at the conclusion of every financial quarter.

This week, we found out that MicroStrategy suffered an eye-watering impairment loss of $146.6 million in Q4 of 2021 — taking the total charges over the past year and a half to $901 million.

Impairment losses illustrate the reduction in the value of an asset, but of course, these losses aren't realized until the BTC is sold.

Although MicroStrategy remains determined to find new ways to buy even more Bitcoin — and put the crypto in its coffers to work — these figures won't be very appealing to businesses who might have been considering making an investment.

Undeterred, MicroStrategy held a Bitcoin for Corporations event yesterday — featuring Michael Saylor and Jack Dorsey as keynote speakers.

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