When MicroStrategy began buying Bitcoin in bulk in the summer of 2020, CEO Michael Saylor said he did so because inflation would make the cash worthless.
The total value of bitcoins it has accumulated since then was $3.4 billion less than it was at the end of the second quarter from the previous quarter, Bloomberg reports.
Typically, the reduction is another paper loss for the business software maker under US accounting rules until any of the Bitcoins are sold, but there are consequences.
MicroStrategy will likely need to take a significant write-down when it reports its second-quarter results. The stock fell 66% in the quarter ended Thursday, outpacing Bitcoin’s 59% drop.
Saylor has downplayed any concerns, sticking to the strategy and adding to his stock last quarter as Bitcoin experienced its biggest price drop in more than a decade.
MicroStrategy noted in late June that it would report results normally later in the next quarter, even though Wall Street regulators typically require companies to flag big losses much earlier.
MicroStrategy’s Bitcoin stock was worth about $5.9 billion at the end of the first quarter, meaning that with Bitcoin ending around $18,900 on June 30, the same stack—including some small purchases announced in late June— it was worth about $2.45 billion, or 58% less than just three months ago.
“To reiterate our strategy, we are looking to acquire and hold Bitcoin for the long term as well,” Phong Le, president and CFO of MicroStrategy, said in a May 3 conference call. “We view our Bitcoin holdings as long-term holdings and currently do not intend to engage in Bitcoin sales.”
Shirish Jajodia, MicroStrategy’s senior director of finance and investor relations, responded to a request for comment saying the company has no plans to sell its Bitcoin and that shareholders support its strategy. MicroStrategy is safe from short-term volatility because of its “strong capital structure,” Jajodia added.
At the height of the cryptocurrency market crash, MicroStrategy bought another 480 Bitcoins worth about $10 million between May 3 and June 28 for about $20,817 each, according to a filing with the U.S. Securities and Exchange Commission on Wednesday.
The Tysons Corner, Virginia-based firm owns about 129,699 Bitcoins that were bought at an average price of about $30,665 each, making the total purchase price about $3.98 billion, according to the 8-K form filed on Wednesday.
While some cryptocurrency-focused companies have also added Bitcoin to their balance sheets, the damage the digital asset and other currencies are taking in the current bear market is likely to make any potential new investor think twice before buying the digital asset. currency.
Still, some proponents of digital assets seem unconcerned about the recent price decline over the long term, as well as Saylor’s strategy.
“If you look at our price target for MicroStrategy, it’s based on a Bitcoin price reaching $95,000 by the end of 2024,” said Mark Palmer, head of digital asset research at BTIG, who has a buy rating on MicroStrategy, with a target price of $950. “Frankly, too much can happen between now and 2024.”
MicroStrategy stock closed the second quarter at $164.30. The stock climbed as high as $1,272.94 in February 2021. It was trading at $123.92 in late July 2020, just before Saylor started buying Bitcoin.
“There will only be 21 million Bitcoins that will be mined in total because there is a deterministic supply of them,” said Palmer. “This means that the price of Bitcoin will be driven by demand as opposed to a supply-demand balance.”