Are Companies … Except MicroStrategy … Still Buying Bitcoin?

MicroStrategy has bought even more bitcoin.

The company snapped up more of the cryptocurrency through the ongoing market downturn, while other companies with significant bitcoin (BTC) reserves have largely refrained from making further purchases amid a rocky and unpredictable market.

The Virginia-based business intelligence firm’s latest purchase of 301 BTC came at a price of roughly $6 million, executive chairman Michael Saylor tweeted on 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, purchased for nearly $4 billion — an average of $30,639. A company spokesperson did not return a request for comment.

Bitcoin was trading at 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 impairments of $918 million in the second quarter, contributing to a net loss of $1.1 billion.

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 looking to incorporate BTC into their corporate balance sheets, write-down costs remain a concern.

Bitcoin is subject to a decline in value if the fair value of bitcoin falls below its book value during the assessed period. The Financial Accounting Standards Board (FASB) is currently assessing impairment charges related to digital assets on the balance sheet.

“If reporting methods are adjusted by the FASB and impairment charges 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 held.”

Ben McMillan, chief investment officer at IDX Digital Assets, told Blockworks macro headwinds are keeping many institutional investors in a risk-off position. Nevertheless, such investors are beginning to think about when it might make sense to become bitcoin buyers.

“In terms of companies that hold 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 guarantee, whereas — for corporate taxes — that’s potentially a much bigger headache to explain on a quarterly earnings call.”

Will other major BTC holders buy more?

Although MicroStrategy continues to buy bitcoin — a strategy it has doubled down on despite the Washington DC attorney general’s filing of a lawsuit against Saylor and his company — other major publicly traded bitcoin owners have taken a break.

Tesla currently has 10,800 BTC, according to bitcointreasures.net. Purchased for approximately $560 million, current value is approximately $205 million.

After spending $1.5 billion to buy about 43,200 BTC in the first quarter of 2021, the company sold about 75% of bitcoin in the second quarter of this year for $936 million. It incurred a $170 million loss on its digital assets that quarter.

CEO Elon Musk said at the time that the sale “should not be taken as a judgment on bitcoin,” adding that Tesla may increase its BTC holdings in the future.

But Morningstar equity strategist Seth Goldstein told Blockworks that given the company’s recent bitcoin sales, he doesn’t expect Tesla to resume purchases 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. “Should Tesla decide to pursue this payment option in the future, they can buy more bitcoin upfront.”

Meanwhile, Block (formerly Square) currently has about 8,000 BTC worth roughly $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, recorded a $36 million bitcoin impairment loss in the second quarter of the year.

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

As for more industries considering adding bitcoin to their balance sheets, Olszewicz said the talk has died down — for now.

“That doesn’t mean some companies aren’t taking advantage of the downturn and seeing it as a buying opportunity,” he said. “We only 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.”

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