bitcoin: MicroStrategy’s Bitcoin holdings hit a record $ 3.4 billion

When MicroStrategy Inc. began buying Bitcoin in bulk in the summer of 2020, CEO Michael Saylor said it was because inflation would make the cash worthless. The stack of cryptocurrencies it has accumulated since was worth $ 3.4 billion less at the end of the second quarter than the previous one.

Technically, the decline is yet another loss of paper for the corporate software maker under US accounting rules until any of the Bitcoins are sold, but there are consequences. MicroStrategy is likely to incur a substantial impairment charge when reporting its second quarter results. And for shareholders, the stock tumbled 66% in the quarter ended Thursday, outpacing Bitcoin’s 59% decline.

Saylor downplayed any concerns, sticking to the strategy and upping its stocks in the last quarter as Bitcoin experienced its biggest price drop in more than a decade. MicroStrategy noted in late June that it will report normal results later in the next quarter, although Wall Street regulators typically require companies to report large losses much sooner.

MicroStrategy’s Bitcoin stock was worth around $ 5.9 billion at the end of the first quarter, meaning that with Bitcoin closing at around $ 18,900 on June 30, the same heap – including some small purchases announced in late June – it was worth about $ 2.45 billion, or 58% less than just three months ago.

“To reaffirm our strategy, we seek to acquire and hold Bitcoin for the long term,” said Phong Le, president and CFO of MicroStrategy, in a May 3 conference call. “We view our Bitcoin holdings as long-term holdings and currently do not plan to engage in the sale of Bitcoin.”

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Shirish Jajodia, MicroStrategy’s senior director of treasury 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 insulated from short-term fluctuations thanks to its “robust capital structure,” added Jajodia.

At the height of the cryptocurrency market crash, MicroStrategy bought an additional 480 Bitcoins worth about $ 10 million between May 3 and June 28, for about $ 20,817 each, according to a filing with the US Securities and Exchange Commission on Wednesday.

MicroStrategy CEO sees Bitcoin as the future

The Tysons Corner, Virginia-based firm holds about 129,699 Bitcoins purchased at an average price of about $ 30,665 each, for a combined purchase price of about $ 3.98 billion, according to an 8-K form filed Wednesday.

While some crypto companies have also added Bitcoin to their balance sheets, the beat the digital asset and other coins are undergoing in the current bear market is likely to make any potential participant think twice before diving in.

Microstrategy 1Agencies

However, some advocates of digital assets seem not to care about the recent long-term price drop and Saylor’s strategy.

“If you look at our MicroStrategy pricing target, it’s based on Bitcoin’s 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 price target of $ 950. “Frankly, a lot can happen between now and 2024.”

MicroStrategy stock closed the second quarter at $ 164.30. The stock climbed to $ 1,272.94 in February 2021. It was trading at $ 123.92 at the end of July 2020, just before Saylor started buying Bitcoin.

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“There will only be 21 million Bitcoins that will ever be mined, because there is a deterministic supply of Bitcoin,” Palmer said. “This means that Bitcoin’s price will be driven by demand rather than the balance of supply and demand.”

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