Are Companies (Aside From MicroStrategy) Still Buying Bitcoin?
Impairment costs remain a concern for companies despite long-term buying opportunities
MicroStrategy’s Michael Saylor | Blockworks exclusive art by axel rangel
- MicroStrategy’s latest buy of 301 bitcoins for $6 million brings its total BTC holdings to 130,000
- Corporate buying of BTC will likely increase if the impairment costs on bitcoin are lifted, Valkyrie Investments head of research says
MicroStrategy has bought even more bitcoin.
The company snapped up more of the cryptocurrency throughout the ongoing market downturn, while other companies with substantial bitcoin (BTC) reserves have largely refrained from making additional purchases amid a rocky and unpredictable market.
The Virginia-based business intelligence firm’s latest buy of 301 BTC came at a cost of roughly $6 million, Executive Chairman Michael Saylor tweeted Tuesday — an average price of about $19,850. The purchase follows MicroStrategy moving earlier this month to raise fresh capital by selling up to $500 million of 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 traded around $18,900 on Tuesday afternoon in New York — giving MicroStrategy’s bitcoin arsenal a value of nearly $2.5 billion.
The company had digital asset impairment charges of $918 million in the second quarter, contributing to a $1.1 billion net loss.
Impairment costs a concern
Josh Olszewicz, head of research at crypto fund manager Valkyrie Investments, told Blockworks that while there are long-term buying opportunities for companies seeking to incorporate BTC into corporate balance sheets, impairment costs remain a concern.
Bitcoin is subject to impairment losses if the fair value of bitcoin decreases below the carrying value during the assessed period. The Financial Accounting Standards Board (FASB) is currently reviewing impairment costs associated with digital assets on the balance sheet.
“If the reporting methods are adjusted by the FASB and the impairment costs are lifted for select digital assets, such as bitcoin, corporate adoption is likely to increase,” Olszewicz said. “Bitcoin on the balance sheet will then accurately reflect realistic market prices rather than the lowest price while the asset is being held.”
Ben McMillan, chief investment officer at IDX Digital Assets, told Blockworks macro headwinds are keeping many institutional investors in a risk-off posture. Still, such investors are starting to mull when it might make sense to become bitcoin buyers.
“As far as companies holding bitcoin on their balance sheets, I think those types of buyers will be more rare,” McMillan said. “The volatility is something investors are paid to underwrite, whereas — for corporate treasuries — it’s potentially a much bigger headache to explain on a quarterly earnings call.”
Will other large BTC holders buy more?
Though MicroStrategy continues to purchase bitcoin — a strategy it has doubled down on despite the attorney general for Washington DC launching a lawsuit against Saylor and his company — other large publicly traded holders of bitcoin have taken a break.
Tesla is currently holding 10,800 BTC, according to bitcointreasuries.net. Bought for roughly $560 million, its current value is roughly $205 million.
After spending $1.5 billion to acquire around 43,200 BTC in the first quarter of 2021, the company sold roughly 75% of its bitcoin in the second quarter of this year for $936 million. It endured a $170 million impairment loss on its digital asset holdings that quarter.
CEO Elon Musk said at the time the sale “should not be taken as some verdict on bitcoin,” adding Tesla could increase its BTC holdings in the future.
But Morningstar Equity Strategist Seth Goldstein told Blockworks that given the company’s recent sale of bitcoin, he doesn’t expect Tesla to resume purchases for at least another year.
“Tesla’s purchase of bitcoin was a part of the company preparing to potentially accept it as a form of payment,” he said. “Should Tesla decide to pursue this payment option in the future, they may purchase more bitcoin in advance.”
Meanwhile, Block (formerly Square) currently holds about 8,000 BTC worth roughly $150 million. The company, which invested $50 million and $170 million in bitcoin during the fourth quarter of 2020 and first quarter of 2021, respectively, recognized a bitcoin impairment loss of $36 million in this year’s second quarter.
Spokespeople for Tesla and Block did not return requests for comment.
As for additional industries considering adding bitcoin to their balance sheets, Olszewicz said the chatter has quieted — for now.
“It doesn’t mean that some companies aren’t taking advantage of the dip and seeing it as a buying opportunity,” he said. “We only ever find out about these purchases after the fact, and it wouldn’t be surprising to see more companies announce later this year that they bought now.”
Don’t miss the next big story – join our free daily newsletter.