MicroStrategy Opts For Bitcoin Wash Trading Loophole, Tax-Harvesting

MicroStrategy sold 704 bitcoins before re-purchasing 810 btc two days later

article-image

OwlyOwl/Shutterstock modified by Blockworks

share

As the deadline for tax-loss harvesting looms, MicroStrategy offloaded more than 700 bitcoins last week, selling the tokens at a loss with the expectation of lowering its tax bill in the future, according to an SEC filing Wednesday. 

The business intelligence company, co-founded by famed bitcoin whale Michael Saylor, sold approximately 704 bitcoins on Dec. 22, 2022 for around $11.8 million, the filing said. With fees and expenses, MicroStrategy ended up receiving about $16,700 per bitcoin. 

Two days later, the company recuperated its bitcoin holdings by purchasing 810 BTC for around $16,800 per token. 

“MicroStrategy plans to carry back the capital losses resulting from this transaction against previous capital gains, to the extent such carrybacks are available under the federal income tax laws currently in effect, which may generate a tax benefit,” the filing read. 

Tax-loss harvesting, a strategy when a trader or business sells underperforming assets to realize a loss and potentially offset gains, has to be completed by the end of the calendar year. 

Traders and corporations are prohibited by the Internal Revenue Service from selling a security for a loss and then repurchasing the same asset for a “substantially identical” price within 30 days, but as of now, the rule does not apply to cryptocurrency trades, according to accountants from crypto firm TokenTax

“Because crypto is not a security, there is no crypto-specific wash sale rule,” Tynisa Gaines, project manager at TokenTax, said.  “However, legislators are actively working to close this loophole.”

If the IRS deems a series of transactions a wash trade, the investor or company will not be able to claim the loss on taxes now or in the future. 

In June, MicroStrategy purchased 480 bitcoins for around $10 million at an average price of close to $20,800 per token. As of Wednesday morning in New York, bitcoin was trading close to $16,600, down about 18% over the past six months and 65% in 2022. 

MicroStrategy’s stock was trading about 2% lower Wednesday after the filing was released. Shares are down more than 70% in 2022.

Saylor is still averaging down his company’s bitcoin stash, announcing a further purchase of around 2,500 bitcoins on Wednesday morning via Twitter. By his accounting, in total, MicroStrategy “holds ~132,500 bitcoin acquired for ~$4.03 billion at an average price of ~$30,397 per bitcoin.”

MicroStrategy bonds, set to mature in 2028, also slumped on Wednesday to 76 cents on the dollar. The software company’s 2027 bonds trade at around 37 cents on the dollar and come with a 28% yield. If MicroStrategy survives until its bonds’ maturity dates and pay the debt in full, investors will pocket a gain.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

recent research

LTIPPanalysis.png

Research

This report is a retroactive analysis of Arbitrum's Long Term Incentives Pilot Program (LTIPP). We collect relevant data at a protocol level and review bi-weekly updates to analyze recipients, their strategies, and the impact of the incentives on high level growth metrics. In particular, we want to highlight outperformers and underperformers, and glean any best practices or lessons learned for protocols distributing ARB incentives in the future. The overarching goal is to synthesize lessons learned that the DAO can reference as it begins thinking about future incentives programs–namely, the working group for incentives that is being actively discussed–especially as Timeboost introduces new conditions for trading and economic activity.

article-image

Sponsored

AI project Zerebro intersects the spheres of artificial intelligence, finance, art, music, and culture

article-image

Allmight is focused on furthering the United States’ leadership in crypto

article-image

The conditions Charles Schwab is waiting for before jumping headfirst into crypto could take shape soon

article-image

The FCA’s director of payments and digital assets shared some takeaways from chats with crypto companies and law firms

article-image

Let’s take a look at how US equities typically perform this time of year and what we might see in the coming days

article-image

Lumina introduces transparency and permissionless integration via an OP stack-based optimium, challenging traditional oracle designs