MicroStrategy announced on January 6 the acquisition of 1,070 Bitcoin for $101 million submit with the US Securities and Exchange Commission (SEC).
This marks the company’s ninth consecutive week of aggressive buying, bringing its total Bitcoin holdings to 447,470 BTC as of December 31, 2024.
The digital assets were purchased for a total price of $27.97 billion, but are now valued at approximately $44.3 billion based on current market prices.
Adopts FASB rules
Meanwhile, the Michael Saylor-led company also announced that it would adopt updated Financial Accounting Standards Board (FASB) rules for crypto reporting.
The new standard requires gains and losses from valuation changes to be recorded in net income, creating greater volatility in the company’s financial results.
Taking this into account, the company estimates a net increase of approximately $12.8 billion in retained earnings from 2025, reflecting a $17.9 billion valuation gain in digital assets.
This is offset by $4 billion in deferred tax liabilities and a $1.2 billion reduction in deferred tax assets.
Bitcoin Strategy Risks
In the SEC filing, MicroStrategy highlighted the many risks associated with its Bitcoin-focused strategy.
In standard disclosure practice, the company acknowledged that concentrating the majority of its assets in Bitcoin increases exposure to price volatility and hostile regulatory developments that could impact the top crypto.
The company also noted that its Bitcoin strategy relies heavily on debt financing. As of December 31, 2024, the company’s debt was $7.274 billion, with annual interest expense of $35.1 million.
However, the Saylor-led company expects to take on more debt to support its Bitcoin purchases, which could create potential liquidity risks. It noted that a significant decline in Bitcoin prices could impact the company’s ability to secure financing, leading to defaults and further financial stress.
It warned:
“A significant decline in the market value of our bitcoin holdings or a negative shift could pose liquidity and credit risks, as such decline or shifts could adversely impact our ability to secure sufficient equity or debt financing to meet our debt and cash dividend obligations. .”
Furthermore, the company admitted that Bitcoin’s role as a source of liquidity during market turbulence remains unreliable. Unlike traditional financial assets, Bitcoin lacks the legal protections of regulated securities, exposing MicroStrategy to greater risks in volatile markets.
Prison problems can lead to further complications. The company noted that current insolvency laws do not provide clear guidance for digital assets held in custodial accounts, which could limit access to Bitcoin holdings in the event of custodian insolvency.
The company’s insurance coverage for its Bitcoin is also insufficient to cover its entire holdings, leaving it vulnerable to losses from cyber attacks, significant mismanagement, or custodian issues.
MicroStrategy admitted that its Bitcoin-focused strategy is relatively untested in fluctuating economic conditions.
It added:
“[So]If bitcoin prices were to decline or if our bitcoin strategy otherwise proves unsuccessful, our financial condition, results of operations and the market price of our Class A common stock would be materially adversely affected.”
Advisory role in crypto
Meanwhile, Saylor has expressed openness to a crypto advisory role in the incoming administration of Donald Trump.
In a recent Bloomberg interview, the Bitcoin bull emphasized his willingness to contribute to the development of a constructive digital asset policy that would promote growth and development.
According to him:
“I’m always willing to weigh in, privately or publicly, on constructive digital asset policies, and if I were asked to serve on some sort of digital asset advisory board, I would probably do so.”
Notably, Saylor is not the only crypto stakeholder willing to work with the incoming Trump administration, which has made several pro-crypto commitments in recent weeks.
