Are companies … aside from MicroStrategy … still buying Bitcoin?

  • MicroStrategy’s Latest $ 6 Million Purchase of 301 Bitcoins Brings Its Total Holdings in BTC to 130,000
  • Companies’ purchase of BTC will likely increase if bitcoin devaluation costs are increased, says Valkyrie Investments head of research.

MicroStrategy bought even more bitcoins.

The company acquired more cryptocurrency during the ongoing market crisis, while other companies with substantial bitcoin (BTC) reserves largely refrained from making further purchases in a rocky and unpredictable market.

The Virginia-based business intelligence firm’s latest purchase of 301 BTC cost about $ 6 million, executive president Michael Saylor tweeted Tuesday, an average price of about $ 19,850. The purchase follows MicroStrategy’s move earlier this month to raise new capital by selling up to $ 500 million in new shares.

With the purchase, MicroStrategy now owns 130,000 bitcoins, acquired for nearly $ 4 billion, an average of $ 30,639. A company spokesperson did not return a request for comment.

Bitcoin was trading around $ 18,900 on Tuesday afternoon in New York, giving MicroStrategy’s bitcoin arsenal worth nearly $ 2.5 billion.

The company charged $ 918 million in digital asset writedowns in the second quarter, contributing to a net loss of $ 1.1 billion.

Devaluation costs a worry

Josh Olszewicz, head of research at cryptocurrency manager Valkyrie Investments, told Blockworks that while there are long-term buying opportunities for companies looking to incorporate BTC into corporate balance sheets, devaluation costs remain a concern.

Bitcoin is subject to impairment if the fair value of bitcoin falls below book value during the valuation period. The Financial Accounting Standards Board (FASB) is currently reviewing the depreciation costs associated with digital assets on the balance sheet.

“If reporting methods are adjusted by the FASB and devaluation costs are increased for certain digital assets, such as bitcoin, corporate adoption is likely to increase,” said Olszewicz. “Bitcoin on the balance sheet will therefore accurately reflect realistic market prices rather than the lowest price while the asset is held.”

Ben McMillan, chief investment officer of IDX Digital Assets, said headwinds at Blockworks are keeping many institutional investors in a risky position. However, such investors are starting to think about when it might make sense to become bitcoin buyers.

“As for companies that hold bitcoin on their balance sheets, I think these types of buyers will be rarer,” McMillan said. “Volatility is something that investors are paid to subscribe for, while – for corporate government bonds – it is potentially a much bigger headache to explain in a quarterly earnings call.”

Will other big BTC holders buy more?

Although MicroStrategy continues to buy bitcoin – a strategy that has doubled down despite the Washington DC Attorney General filing a lawsuit against Saylor and his company – other large publicly traded bitcoin holders have taken a break.

Tesla currently holds 10,800 BTC, according to Purchased for approximately $ 560 million, its current value is approximately $ 205 million.

After spending $ 1.5 billion to acquire about 43,200 BTC in the first quarter of 2021, the company sold about 75% of its bitcoins in the second quarter of this year for $ 936 million. That quarter it suffered a $ 170 million loss in value on its digital asset holdings.

CEO Elon Musk said at the time that the sale “shouldn’t be seen as a verdict on bitcoin,” adding that Tesla could increase its holdings in BTC in the future.

But Morningstar Equity Strategist Seth Goldstein told Blockworks that given the company’s recent bitcoin sale, he doesn’t expect Tesla to resume buying for at least another year.

“Tesla’s purchase of bitcoin was part of the company preparing to potentially accept it as a form of payment,” he said. “If Tesla decides to pursue this payment option in the future, it could buy more bitcoins ahead of time.”

Meanwhile, Block (formerly Square) currently holds around 8,000 BTC worth around $ 150 million. The company, which invested $ 50 million and $ 170 million in bitcoin in the fourth quarter of 2020 and the first quarter of 2021 respectively, recognized a $ 36 million loss in bitcoin value in the second quarter of this year. .

Spokespeople for Tesla and Block did not return requests for comment.

As for other industries considering adding bitcoin to their balance sheets, Olszewicz said the rumors have calmed down, for now.

“It doesn’t mean that some companies aren’t taking advantage of the decline and seeing it as a buying opportunity,” he said. “We only discover these purchases after the fact, and it wouldn’t be surprising to see more companies announce by the end of the year that they have bought now.”

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  • Ben Strack

    Ben Strack is a Denver-based journalist who focuses on macro and crypto-native funds, financial advisors, structured products and integration of digital assets and decentralized finance (DeFi) in traditional finance. Prior to joining Blockworks, he was involved in the wealth management industry for Fund Intelligence and was a reporter and editor for various local newspapers on Long Island. He has a BA in Journalism from the University of Maryland. Contact Ben by email at [email protected]

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