MicroStrategy will continue to buy BTC despite impairment charges

MicroStrategy plans to continue investing its free flows into bitcoin, and expects its investors to think of it as a vehicle for crypto exposure.

The firm shared its Q4 earnings report today, noting that it acquired 53,922BTC in 2021 at an average purchase price of $48,710. That brings the firm’s total BTC up to 124,391. 

But those holdings come with impairment charges, a recent concern of the Securities and Exchange Commission (SEC). In accounting, impairment shows how much was lost if the price of the asset on a balance sheet declines compared to when it was first purchased. MicroStrategy has pushed for updates in American accounting practices to accommodate for the volatility of crypto assets. The SEC, however, said it expects the firm to cease adjusting for impairment losses in its accounting practices and use traditional methods.

In Q4, the firm posted $146.6 million in bitcoin impairment expenses. In all of 2021, impairment charges reached $830.6 million compared to 2020’s $70.7 million. In total, the entirety of its holdings carry a value of $2.9 billion compared to the aggregate cost of $3.8 billion, making up the $901 million cumulative impairment charge. 

Still, holding bitcoin on the balance sheet will continue to be a priority for the firm. Just this morning it continued on its buying spree, acquiring an additional 660 BTC for about $25 million in cash. That brings its total to 125,051 BTC.

CEO Michael Saylor said investors may think of MicroStrategy as an alternative to bitcoin futures-based exchange-traded funds, since the firm provides indirect exposure to cryptocurrency without the fees associated with rolling over contracts. 

The firm is also looking into opportunities to utilize its troves of bitcoin, according to Saylor. Saylor pointed out that there are opportunities to use some of the funds not dedicated as collateral to generate yield, but did not commit to any plans.