MicroStrategy, a software company, famously holds over 129,000 worth of Bitcoin. It is among some of the few major corporations, which hold a substantial amount of Bitcoin on their balance sheets. Other companies with a large Bitcoin haul are Tesla and Block.
Company Plans to Hold onto its Bitcoin
According to the company’s new chief financial officer, MicroStrategy intends to hold onto its Bitcoin. This is despite a massive sell-off in the crypto markets. In May 2022, the crypto market has been in free fall as crypto coins have lost double-digit percentages in market cap.
Since the collapse of TerraUSD, which triggered the selloff, Bitcoin’s value has dropped by 32% to trade at around $30,000 as of Friday, May 20, 2022. Since the collapse of the crypto market began, the price of MicroStrategy’s stock has dropped by around 53% and is now trading at around $212 per share. In general, technology stocks have been on the decline as investors realign their priorities in line with rising interest rates.
As of March 31, the company holds $2.9 billion worth of Bitcoin. The company does not plan to sell any of that Bitcoin. One reason for this may be that it has not faced any pressure from shareholders to sell its BTC haul. According to its CFO, the company’s investors are aligned with this strategy.
The CFO added that the company does monitor BTC prices. However, he declined to state whether they plan to buy more BTC in the future. According to the CFO, most of the recent price changes were triggered by activities outside of BTC. He noted that none of the fundamentals around Bitcoin had changed, which would present an issue to their strategy.
How Companies Treat Bitcoin
The Association of International Certified Professional Accountants released guidelines on how to deal with crypto. According to these guidelines, when a company holds crypto, they classify the assets as indefinite-lived intangible assets. Companies holding crypto have to write down the value of the assets if they drop below the purchase price, depending on the outcome of impairment tests. If their value rises, they can only record a gain when they sell the assets, not while holding the assets.
Thus far, corporate investments in Bitcoin do not appear to be paying off. As a result, combined with the recent market downturn with stock prices falling, it is unlikely that many more corporations will be adding Bitcoin to their balance sheets any time soon.
The Impact of the Volatility
Regulators have stepped up their push for regulating the crypto market after the recent market crash. One of the impacts of the recent collapse might be that regulators introduce stricter regulations for the sector. In places where there are already strict laws against crypto trading, those laws could be tightened further. Besides that, it could lead to more resources being committed to monitoring the crypto markets to detect illegal activities. By the end of 2022, various nations should have created clearer laws and regulations around the crypto sector.
