Near parity and fall – MicroStrategy reports third quarter results this year, with relatively lower losses for the Bitcoin (BTC).
MicroStrategy: Bitcoin losses plummet
The company’s first financial results under its new CEO, Phong Le, have come in. For the third quarter of this year, MicroStrategy’s revenue was $125.4 millioncompared to $128 million for the same period last year.
Impairments related to the company’s bitcoin holdings, meanwhile, saw sharp declines. They are raised to $727,000 in the third quarter, compared to $917.8 million of impairment charges recorded in the second quarter.
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A relatively stable third quarter for Bitcoin
This large difference in losses on MicroStrategy’s Bitcoin stocks can be explained by the differences in the closing levels of Bitcoin at the end of the first three quarters of this year.
The cryptocurrency had closed the month of March around $45,535, and the month of June near $19,940. The differences between these two price levels are significant, a gigantic gap which explains the $917.8 million in theoretical losses.
Nevertheless, Bitcoin closed the month of September at $19,430, or almost at the same level closing price than that of June. With the cryptocurrency finishing second and third at almost equal price levels, the impairment losses seen for the third quarter did not even reach $1 million.
An accounting method now to be reviewed
The current method of accounting for Bitcoin obliges companies that hold it to adjust the value of the cryptocurrency if its price drops. However, the value of bitcoins cannot be updated upwardsonly upon the sale of the assets concerned.
This method of accounting does not reflect the reality of developments in the crypto markets. Instead, the Financial Accounting Standards Board (FASB) argues for applying a method of accounting for cryptocurrencies at fair value. Such a change would allow companies like MicroStrategy to recognize both losses and gains on Bitcoin, like other traditional financial assets.
In a statement, MicroStrategy Chief Financial Officer Andrew Kang said fair value accounting would drive the adoption of Bitcoin by institutional investors, “as an asset class.”
MicroStrategy’s appetite for Bitcoin has not diminished during this crypto winter. Recent documents the company filed on its Bitcoin purchases, reveal that the company has acquired a total of 130,000 BTC.
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