With the excitement around the impending launch of Bitcoin ETFs, MicroStrategy Inc. has seen the value of its Bitcoin investment double to $6.7 billion, becoming one of the biggest beneficiaries of the news of the launch.
Doubling Its Bitcoin Investment
MicroStrategy had officially acquired 114,042 Bitcoin at an aggregate price of $3.16 billion. The average price of each Bitcoin at the time of purchase was $27,713, which was inclusive of all fees and expenses.
MicroStrategy had purchased an additional 5,050 bitcoin for around $242.9 million. Over the 3rd quarter of 2021, MicroStrategy purchased 8,957 bitcoin for $419.9 million, with the average price of each bitcoin around $46,87. Their investment is now valued at $6.7 billion, with the current price of Bitcoin crossing $60,000 as the cryptocurrency approached record highs on Friday.
MicroStrategy’s Bitcoin Bet
Founder and chief executive of MicroStrategy, Michael Saylor, started to purchase Bitcoin in August 2020. At the time, he stated that it would be better to hold Bitcoin on MicroStrategy’s balance sheet rather than just cash or low-yielding US Securities, which was the accepted practice among most companies.
However, looking at MicroStrategy, other companies like Tesla and Square followed suit, which pushed Bitcoin’s price to a record high in April before the price fell once more.
Bitcoin Still Considered An Intangible Asset
While MicroStrategy has gained $3.54 billion since its investment, non-investment companies such as MicroStrategy are required to report Bitcoin as an intangible asset. What this means is that Bitcoin will be recorded on the company’s balance sheet at its historic cost and can be impaired if the value drops.
However, if the price of Bitcoin increases, the value cannot be revised. MicroStrategy has already written to the Financial Accounting Standards Board, stating,
“This disconnect between an entity’s financial statements and the economic reality of its financial condition and results of operations creates confusion and fails to provide investors, analysts, and the general public with the information they need to make an informed assessment of an entity’s current and future prospects.”
Bitcoin’s Meteoric Rise
Bitcoin climbed above the $60,000 mark for the first time since April as optimism among traders rose regarding the chances of the SEC greenlighting the first-ever bitcoin futures exchange-traded fund. If the SEC approves the ETF, then it would give mainstream investors significant exposure to Bitcoin, marking a pivotal moment in the crypto industry.
The Securities and Exchange Commission is all set to approve the first US Bitcoin futures exchange to start trading from next week, which will be a landmark victory for the crypto space.