For Bitcoin-believers Musk and Saylor, a bill looms
Billionaires Elon Musk and Michael Saylor will soon be in sharp focus. The first assessments of the potential losses that their large bets on bitcoin have caused are approaching.
Through the companies they lead, Tesla (TSLA) – Get Tesla Inc. Report for Musk and MicroStrategy (MSTR) – Get MicroStrategy Incorporated report for Saylor, they have bet on the king of cryptocurrencies. If this risky effort yielded results in 2021, a year marked by cryptocurrency, it now appears to have soured.
In fact, the cryptocurrency market has lost more than $ 2 trillion since reaching its all-time high of $ 3 trillion in November last year. The crypto market is valued at just $ 900 billion at the last check, according to computer firm CoinGecko.
Almost all cryptocurrencies go through a bad period. Prices have fallen sharply due to fears of a potential recession. During such periods, investors tend to liquidate their positions in all riskier assets, which adopt digital currencies.
The crypto industry is also experiencing a credit crunch, affecting lenders who have committed large sums to the hedge fund Three Arrows Capital, also known as 3AC. Three Arrows invested this money in the Luna coin, which collapsed in May with its sister token, UST.
Bitcoin prices have fallen 72% to $ 19,299.74 from their record high of $ 69,044.77 recorded on November 10. Ether, the second digital currency by market value, collapsed 79% to $ 1,039.36.
Huge write-down fees may be pending
This fall in prices means that bitcoins bought before the crisis began have lost much of their value. This has consequences for public companies, which have to register asset depreciation or impairment related to their cryptocurrencies.
When the earnings season is underway, we will soon know the extent of the damage the balances of these companies incurred during the so-called crypto winter.
The first company up is Tesla: the Austin manufacturer of premium electric vehicles reports results for the second quarter on July 20th.
In February 2021, Elon Musk’s group said they had bought 43,200 bitcoins for a total value of $ 1.5 billion. According to Bitcoin Treasuries, the company’s bitcoin portfolio is down to only $ 829 million at the last check. Tesla bitcoins have thus weakened by almost 700 million dollars.
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Musk recently indicated that he bought dogecoin dip and will continue to support the meme coin despite market shock. He said nothing about bitcoin.
The results of the software manufacturer MicroStrategy will also be followed closely. It is the listed company that has the most bitcoin.
According to a recent Securities and Exchange Commission submission, the balance sheet contains 129,699 bitcoins, of which 480 were purchased between May 3 and June 28. Total acquisition price: $ 3.98 billion. The value of these bitcoins is currently $ 2.49 billion. Their value has fallen by almost $ 1.5 billion.
“Take the long term. #Bitcoin,” Saylor tweeted on July 12, appearing to say his faith in digital currency is unshakable. “Bullish on #Bitcoin”, he posted the day before.
What will Dorsey and Novogratz say?
MicroStrategy implemented its bitcoin strategy in the third quarter of 2020, and became the first established company to add digital currency to its balance sheet.
One of the consequences of this decision is that the group’s share development largely reflects the direction of bitcoin’s price, up or down.
MicroStrategy shares have lost 46% of their value since the beginning of May, when the crypto winter began to intensify.
The company must publish its quarterly results between the end of July and the beginning of August.
It will also be interesting to hear what fintech is blocking (SQ) – Get Block Inc. Class A Report, formerly Square, will say. Block, founded and directed by billionaire Jack Dorsey, has bought 8027 bitcoins for $ 220 million. Their value has also fallen significantly. Block will report earnings on 4 August.
And statements from billionaire and former banker Mike Novogratz will also be excited. His Galaxy Digital Holdings ( (BRPHF) ), which has invested in bitcoin and was exposed to Luna, reports quarterly results in August. Galaxy Digital shares have lost almost 64% of their value since the beginning of May.
