Bitcoin Under Pressure

MicroStrategy reports Q2 loss as value of bitcoin holdings dives

Nasdaq-listed business intelligence firm MicroStrategy has posted a record loss for the second quarter as a broad crypto crash wiped out about $425 million in market value of its bitcoin holdings.

The Virginia-based corporation, spearheaded by one of bitcoin’s most vocal proponents, reported a loss of $300 million in Q2 2021, compared to a $3 million profit a year earlier.

The sluggish performance comes less than two months after MicroStrategy raised $500 million in bonds to acquire more of bitcoin. The move signaled that institutional investors are still optimistic about the future of the world’s largest cryptocurrency as it pares back losses from a massive crash in May.

The business intelligence giant, headed by crypto bull Michael Saylor, had previously sold debts worth more than $2.0 billion for the explicit purpose of purchasing Bitcoin.

As of the end of 2021’s second quarter, MicroStrategy holds about 105,085 bitcoins, which were acquired at an average price of nearly $25,000 per bitcoin. At the current price, Microstrategy’s bitcoins are worth more than $4.2 billion.

For reference, MicroStrategy’s market cap stands at $6.0 billion as of Thursday, meaning the company places nearly 68% of its net value in Bitcoin.

In a sign of massive interest from investors, Microstrategy CEO said his company is doubling down on its cryptocurrency bet and will continue to acquire additional bitcoins.

“We continue to be pleased by the results of the implementation of our digital asset strategy. Going forward, we intend to continue to deploy additional capital into our digital asset strategy,” said Saylor, noting the firm received more than $1.5 billion in orders interest for the last capital raise.

MicroStrategy has good reason to do that again. The publicly-listed company’s share price shot up by approximately 600 percent as MicroStrategy’s Bitcoin bet had turned into a profitable one before the last crash. The price of Bitcoin rose from $11,000 in August, when it made its first crypto purchase via Coinbase’s institutional service, to more than $61,000 earlier this year.

In 2020, the company bought an aggregate of 70,470 bitcoins, which were acquired at an aggregate cost of $1.1 billion or an average purchase price of $15,964 per coin, well below current levels.

MicroStrategy CEO Saylor was said to be the one who convinced Elon Musk to move $1.5 billion dollars of Tesla’s funds into bitcoin. Although the big party started after the news of the Tesla purchase and its acceptance of Bitcoin as a form of payment, the electric vehicle maker was not the first heavyweight firm to convert a portion of its cash into bitcoin.

When a wave of institutional investors started to warm to Bitcoin through the second half of 2020, Payment startup Square and other Wall Street whales including Microstrategy adopted the policy of placing their cash surpluses into crypto.