Microstrategy on the verge of bitcoin indigestion? New purchases, despite accounting losses

Losing Today, Winning Tomorrow – On paper, the IT company MicroStrategy is making significant losses on the bitcoins (BTC

) it has purchased. However, the company is still planning to increase its inventory, especially since these losses (all theoretical) turn into profits depending on the accounting principles used.

Indigestion of bitcoins? Not for MicroStrategy!

The $424.8 million in losses on its bitcoins recorded in the second quarter has not made MicroStrategy lose its appetite for them. In fact, Michael Saylor’s company is planning to acquire more. These losses incurred by the company are actually theoretical losses, on paper, which were calculated based on the Bitcoin price at the end of the second quarter.

The second quarter financial report

shows that the company held about 105,085 BTC with a book value of $2.051 billion, with a loss in value of $689.6 million since their acquisition. However, Saylor remains convinced by Bitcoin, as shown by these few lines in the report:

“We continue to be pleased with the results of the implementation of our digital asset strategy. Our most recent fundraising has allowed us to grow our digital assets to over 105,000 BTC. Going forward, we intend to continue deploying additional capital into our digital asset strategy.”

Publication Twitter de MicroStrategy annonçant la volonté de Michael Saylor, le CEO, à acheter davantage bitcoins (BTC), malgré les pertes comptablesPublication Twitter de MicroStrategy annonçant la volonté de Michael Saylor, le CEO, à acheter davantage bitcoins (BTC), malgré les pertes comptables Michael Saylor’s publication – Source: Twitter

Tesla also just released its second quarter results

. The report reveals a $23 million loss in value on BTC held by Elon Musk’s company.

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The

results on BTC held by MicroStrategy actually depend on how they are integrated into the accounting calculations. Both MicroStrategy and Tesla cl

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They have Bitcoin as an intangible asset on their balance sheet. Given the accounting principles, they must therefore take into account even a theoretical loss in value, but they are not in a position to benefit from a capital gain on Bitcoin until they actually profit from their holdings by selling them.

The $424.8 million losses were thus calculated in accordance with U.S. generally accepted accounting principles (GAAP), which are used to prepare most financial statements.

A calculation that ignores GAAP, and excludes “the impact of stock-based compensation expense and impairment losses and gains on the sale of intangible assets,” shows the opposite. MicroStrategy reportedly recorded a profit of nearly $1 billion on its BTC during the second quarter. The cost basis of bitcoin holdings is $2.741 billion, with a market value of $3.653 billion as of June 30, 2021.

Bitcoin has taken off from the $30,000 mark and is currently trying to hold above $40,000. HODLers have generally understood that losses on Bitcoin are mostly temporary. Thus, a return to the $20,000 mark remains just as possible as a rise to the $60,000+ mark.

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