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For Bitcoin Believers Musk and Saylor, a Reckoning Looms

by WOOWinvest
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For Bitcoin Believers Musk and Saylor, a Reckoning Looms

Billionaires Elon Musk and Michael Thaler will soon be in the spotlight. Their first assessment of the potential losses on Bitcoin’s big bet is just around the corner.

Through the companies they lead, Tesla (TSLA) – Get Tesla Inc report For Musk and MicroStrategy (MSTR) – Get the MicroStrategy Incorporated report For Saylor, they are betting on the king of cryptocurrencies. If that risky bet pays off in 2021, a year marked by crypto mania now seems to have turned sour.

In fact, the cryptocurrency market has lost more than $2 trillion since hitting an all-time record of $3 trillion last November. According to data firm CoinGecko, the crypto market was worth just $900 billion at the last check.

Almost all cryptocurrencies are going through a bad time. Prices fell sharply amid fears of a potential recession. During such times, investors tend to liquidate their positions in all riskier assets, including digital currencies.

The crypto industry is also experiencing a credit crunch, affecting lenders that committed large sums to hedge fund Three Arrows Capital, also known as 3AC. Three Arrows invested the money in the Luna token, which crashed in May along with its sister token, UST.

Bitcoin prices have fallen 72% to $19,299.74 from an all-time high of $69,044.77 set on Nov. 10. Ether, the second-largest digital currency by market capitalization, plunged 79% to $1,039.36.

Huge impairment charges may be coming

This price drop means that bitcoins bought before the crisis began have lost most of their value. This has implications for public companies, which must record depreciation or impairment charges on assets associated with their cryptocurrencies.

As earnings season rolls around, we’ll soon learn just how much damage these companies’ balance sheets have suffered during the so-called crypto winter.

The first company to rise was Tesla: The Austin premium electric car maker reported its second-quarter results on July 20.

In February 2021, Elon Musk’s team said it had purchased 43,200 bitcoins worth a total of $1.5 billion. The firm’s bitcoin portfolio fell to just $829 million at the last check, according to data from Bitcoin Treasury. As a result, Tesla Bitcoin lost nearly $700 million in value.

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Musk recently stated that he is buying Dogecoin and will continue to support the meme coin despite the market turmoil. He said nothing about Bitcoin.

Also under scrutiny is the work of software maker MicroStrategy. It is by far the largest public company holding bitcoin.

According to a recent SEC filing, the balance sheet holds 129,699 bitcoins, 480 of which were purchased between May 3 and June 28. Total purchase price: $3.98 billion. The value of these bitcoins is currently $2.49 billion. Their value has fallen by nearly $1.5 billion.

“Long term. #Bitcoin,” Thaler tweeted on July 12, appearing to say that his belief in digital currencies is unwavering. “Bull about #Bitcoin,” he posted the day before.

What will Dorsey and Novogratz say?

MicroStrategy implemented its Bitcoin strategy in the third quarter of 2020, becoming the first established company to add the digital currency to its balance sheet.

One consequence of this decision is that the group’s stock performance largely reflects the upward or downward direction of Bitcoin’s price.

Shares of MicroStrategy have fallen 46% since the crypto winter began to intensify in early May.

The company must report its quarterly results between the end of July and the beginning of August.

It will also be interesting to hear what the fintech block is about (SQ) – Get Block Inc. Grade A Report, formerly Square, would say. Founded and directed by billionaire Jack Dorsey, Block holds 8,027 bitcoins worth $220 million. Their value has also dropped significantly. Block will announce its earnings on August 4.

Remarks from billionaire and former banker Mike Novogratz will also be eagerly anticipated. His Galaxy Digital Holdings ( (BRPHF) ), which invested in Bitcoin and approached Luna, reported quarterly results in August. Shares of Galaxy Digital have fallen nearly 64% since early May.

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