MicroStrategy Inc., the largest BTC company, reportedly accumulated $1.8 billion in unrealized losses from its purchases.
The American company and its subsidiaries hold about 130,000 bitcoins, worth about $2.2 billion at current prices. These BTC were purchased at a total price of nearly $4 billion, with each coin costing around $30,369. Therefore, the company is in the red by up to $1.8 billion.
Can MicroStrategy Hang On?
Executive Chairman Michael Saylor previously said that the company will never sell its BTC. This refusal to sell means the company faces significant theoretical losses. Separately, the company recorded an impairment charge of $917.8 million after reporting losses related to the fall in the price of Bitcoin earlier this year.
MicroStrategy categorizes Bitcoin as an intangible asset, meaning the company must permanently recognize any decline in the asset’s value. If she decides to sell her bitcoins, she must file capital gains tax with the Internal Revenue Service.
Mr. Saylor has resigned as CEO of MicroStrategy in August 2022 to focus on the company’s Bitcoin strategy, this after posting losses a billion dollars. Since then, the company has spent $6 million cash surplus to buy 301 bitcoins in September 2022. His total purchase of 301 coins is already below the break-even point, as the average price of the asset has since fallen nearly 15%.
“In an expansionary monetary environment, you have to look for scarce assets,” Saylor said. at Bloomberg in February 2021. “The rarest asset in the world is Bitcoin. It’s digital gold. “
Margin call signs on the horizon?
In June 2022, Saylor denied that MicroStrategy had received a margin call for a $205 million BTC secured loan from Silvergate Capital. Indeed, a margin call occurs when an investor borrows money to make transactions that represent a multiple of an initial amount called margin. When the margin value falls below a certain threshold, the investor must pay additional funds to keep the deal open.
Saylor said the company has enough bitcoins to keep the loan secured unless the asset’s price falls below $3,500.
The need for clear regulations
In an interview with CNBC on November 10, 2022, Mr. Saylor said that the recent decline of FTX it is a boon for Bitcoin and a bane for the crypto industry. Indeed, unlike tokens on exchanges, BTC is a commodity that can be stored on its own, he noted.
He says regulators should provide clear guidance on how to “register your digital security, digital currency, digital token and digital exchange.”
At $16,856 per BTC, the asset’s current price remains higher than MicroStrategy’s first bitcoin purchase in 2020.
Indeed, at that time, the company bought 21,454 BTC at about $11,652 per Bitcoin.
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