MicroStrategy is a US-based software company that has accumulated a large amount of Bitcoin and stands out with these investments. The company sold 704 Bitcoins on December 22, 2022, generating approximately $11.8 million in revenue, and the price per Bitcoin at that time was $16,776. Just two days later, 810 Bitcoins were purchased again. These transactions were carried out with the aim of balancing the resulting capital losses with the capital gains experienced in the past and providing tax advantages.
FASB accounting rules and balance sheet impact
Due to FASB fair value accounting standards that went into effect on January 1, 2025, MicroStrategy began revaluing all of its Bitcoin holdings at the end of each quarter based on the current market price. In the first quarter of 2026, the price of Bitcoin fell from $87,500 to $67,700, leading to a loss of 23%. This sharp decline was recorded as a net loss of $12.54 billion on MicroStrategy’s balance sheet. The company also created $2.2 billion in deferred tax assets from high-cost Bitcoin purchases.
One obvious reason for this loss to the company’s balance sheet is that the cost basis of Bitcoin investment is well above the current market level. According to the company’s earnings announcement meeting, when the Bitcoin price was around $80,000, the total number of Bitcoins purchased by MicroStrategy for more than $80,000 exceeded 434 thousand. The amount of unrealized loss resulting from this was 7.6 billion dollars.
“The company management plans to provide tax advantages by using capital losses arising from this transaction against prior capital gains to the extent possible under existing federal income tax laws,” he said.
Sales revenues and strategic goals of the company
According to the statements made by the company, the proceeds from the sale of Bitcoin are used for multiple purposes. Major objectives include paying off $8.2 billion of convertible debt, repurchasing company shares when the market value to net asset value falls below 1.22x, and financing annual dividend payments on perpetual preferred shares of up to $1.5 billion.
MicroStrategy’s core strategy stands out as increasing the “Bitcoin per share” ratio. This ratio is obtained by dividing the company’s Bitcoin assets by the total number of outstanding shares and is an important indicator for investors.
Possibility of recovery in Bitcoin price
If the Bitcoin price reaches its previous levels again and MicroStrategy invests in lower-cost Bitcoins, the $2.2 billion tax advantage that has been sitting on the balance sheet so far could be used against future gains. Thus, the company can reduce its costs and increase its potential profits.
The company’s shares rose 1% in premarket trading, while the price of Bitcoin traded above $81,000, according to the news.
