Cryptocurrency Crashes How Much Did MicroStrategy, Firmly Long on Bitcoin, Really Lose?

The latest loss in bitcoin value may be more than half a billion.

Editor’s note: MicroStrategy stock price echoes the price of bitcoin.

Despite the fact that bitcoin shorts have been in full swing in recent days, bitcoin powerhouse MicroStrategy is still taking advantage of the low.

MicroStrategy said Monday (June 21) that it has more than 100,000 bitcoins after completing another round of transactions that cost about $489 million for 13,005 bitcoins.

However, as recently as June 22, the price of bitcoin dipped below the $30,000 mark. How much are MicroStrategy’s bitcoin holdings still worth as the bitcoin short is in full swing?

MicroStrategy holds over 100,000 bitcoins at an average price of $26,080

MicroStrategy said in a press release on its website Monday that it bought about 13,005 additional bitcoins for about $489 million in cash, with an average purchase price of $37,617 each, including fees. As of June 21, the company held about 105,085 bitcoins (92,079 of which were held by subsidiary MacroStrategy LLC), all at an average buy price of $26,080 per bitcoin, including fees.

Cryptocurrency Crashes How Much Did MicroStrategy, Firmly Long on Bitcoin, Really Lose?

(Source: MicroStrategy official website)

It can be expected that MicroStrategy’s total purchase price is around $2.6 billion.

It is worth mentioning that MicroStrategy’s profit from holding bitcoin has shrunk significantly from April. At that time, the bitcoin price was above $50,000, and with the current bitcoin in the $30,000 range, this means that MicroStrategy’s profit per bitcoin held has shrunk by nearly $20,000.

According to the portal, as of April 5, 2021, MicroStrategy held about 91,579 bitcoins with a total purchase price of $2,226 million, for an average purchase price of about $24,311 per bitcoin.

Latest Bitcoin Value Loss or Over $500 Million

MicroStrategy’s position hike on Monday did not stem the momentum of bitcoin’s plunge. On Monday, bitcoin fell to $32,288 for the first time since June 8.

According to U.S. accounting standards, companies should recognize an impairment loss on assets once the market value of a purchased asset falls below the level it was at the time of purchase. And bitcoin hit an intraday low of $31,735 on Monday, according to data compiled by Bloomberg, meaning the size of the write-down on this latest deal for MicroStrategy has reached nearly $77 million.

While $77 million may seem insignificant for a company with a market cap of $5.7 billion, MicroStrategy’s net profit from 2018 to 2020 is actually just $67.6 million.

This comes after MicroStrategy filed a document earlier this month showing that it expects to record at least $284.5 million in bitcoin-related impairment losses for the three-month period ending June 30. And the latest decline in the value of the currency and investment losses would bring the company’s total bitcoin-related losses to more than $500 million, according to the company’s filing and data collected by Bloomberg.

Continuing to add to its bitcoin position, the stock is down 50% from its all-time high

However, the asset impairment does not appear to have affected MicroStrategy’s confidence in bitcoin. Since June of this year, MicroStrategy has started to take advantage of the low in Bitcoin by issuing debt and other means.

On June 8, MicroStrategy announced that it was going to offer $400 million in senior secured bonds, which will again be used to purchase BTC, a senior secured note for qualified institutional investors that will mature in 2028. This is not the first time MicroStrategy has issued debt to buy bitcoin. On December 7 of last year, MicroStrategy announced a $400 million convertible bond offering and will invest the proceeds in bitcoin.

On June 14, MicroStrategy announced the completion of a senior secured bond offering due 2028. The bonds were issued in an aggregate principal amount of $500 million and carry an annual interest rate of 6.125%. The notes were offered privately to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended, and sold to persons outside the United States under Regulation S of the Securities Act.

Cryptocurrency Crashes How Much Did MicroStrategy, Firmly Long on Bitcoin, Really Lose?

(Source: MicroStrategy official website)

On June 15, MicroStrategy filed a regulatory filing with the SEC with plans to issue $1 billion in stock, the proceeds of which could be used to purchase bitcoin.

Benefiting from the early bitcoin buzz, MicroStrategy’s stock hit an all-time high in February, peaking at $1,315. Today, MicroStrategy shares have fallen more than 50% from their all-time high, echoing bitcoin’s plunge over the same period.

Gyro Finance Summary

As can be expected, MicroStrategy’s value-added profits from bitcoin have been shrinking as the price of bitcoin continues to fall, and its stock price is a clear reflection of this. Moreover, if the bitcoin price falls below $30,000, which is below MicroStrategy’s purchase cost, its strategy to increase its position may be restricted by regulation. Gyro Finance will continue to monitor MicroStrategy’s latest coin holdings.

Posted by:CoinYuppie,Reprinted with attribution to:
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