MicroStrategy – the famed software giant turned institutional bitcoin bull – has done something many of us thought it incapable of doing: it’s selling some of its bitcoin.
MicroStrategy Sells, Then Buys, BTC
MicroStrategy announced it had sold some of its BTC reserves on December 22, 2022. The company says it did so for tax purposes, but that it’s also going to use some of the proceeds to purchase additional bitcoin, suggesting that while executives are arguably trying to play everything a little straighter, they still haven’t fully grasped the lessons of the past.
MicroStrategy sold about 704 bitcoin units, which at the time, went for about $11.8 million. This is a huge dip in profit for the firm considering how much those units were likely purchased for. The company has been buying bitcoin for over two years, beginning first in August of 2020. It arguably started a trend, as at that time, institutions investing in crypto just wasn’t something that really happened, and if it did, it was extremely rare.
MicroStrategy was the first major institution to invest in bitcoin. From there, companies like Square also took part in crypto investing. At the time of that initial purchase, MicroStrategy bought bitcoin for around $10,000 per unit, which back at the time, was considered a major number. Nobody could have anticipated that just over a year later, the currency would nearly increase its size by about six times.
MicroStrategy initially contended with a $2K profit gain for each unit, as the price of bitcoin instantly went from $10K to $12,000 before the month was out. Given that the company had bought over $250 million worth of the asset, it was assumed that things were moving in the right direction, though next month turned out to be particularly bearish for bitcoin, and the currency dropped in price.
Many other companies likely would have written their losses off and stepped away, though MicroStrategy stayed in the game. It continued to invest hundreds of millions of dollars into BTC, and by the time BTC reached $68,000 the following November, MicroStrategy had billions of dollars in bitcoin to its name, making it one of the most successful crypto investors in history.
But with so many losses recorded for 2022, it’s unfortunate that those billions in profit have since turned into billions in debt. The bitcoin decision became disastrous, and Michael Saylor – the 30+ year CEO of the company – resigned from his position, choosing instead to serve as the executive chairman.
Trying to Grease the Tax Wheels?
Regarding its recent selling and purchasing decision, MicroStrategy said in a statement:
MicroStrategy plans to carry back the capital losses resulting from this transaction against previous capital gains, to the extent such carrybacks are available under the federal income tax laws currently in effect, which may generate a tax benefit.