MicroStrategy disclosed the acquisition of 1,070 Bitcoin for $101 million in a Jan. 6 filing with the US Securities and Exchange Commission (SEC).
This marks the firm’s ninth consecutive week of aggressive purchases, bringing its total Bitcoin holdings to 447,470 BTC as of Dec. 31, 2024.
The digital assets were purchased for an aggregate 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 adopting the 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, introducing greater volatility to the company’s financial results.
Considering this, the company estimates a net increase of around $12.8 billion in its 2025 beginning retained earnings, 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-centric strategy.
In standard disclosure practice, the firm acknowledged that concentrating most 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 Dec. 31, 2024, the company’s debt stood at $7.274 billion, with annual interest expenses of $35.1 million.
However, the Saylor-led firm expects to incur more debt to support its Bitcoin purchases, which could create potential liquidity risks. It noted that a significant drop in Bitcoin prices could impact the company’s ability to secure financing, leading to defaults and further financial strain.
It warned:
“A significant decline in the market value of our bitcoin holdings or a negative shift may create liquidity and credit risks, as such a decline or such shifts may adversely impact our ability to secure sufficient equity or debt financing to service our debt and cash dividend obligations.”
Moreover, the company admitted that Bitcoin’s role as a liquidity source 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.
Custodial issues can lead to further complications. The company noted that current insolvency laws do not provide clear guidance for digital assets held in custody accounts, which could limit access to Bitcoin holdings in case of custodian insolvency.
The company’s insurance coverage for its Bitcoin is also insufficient to cover its total holdings, leaving it vulnerable to losses from cyberattacks, key mismanagement, or custodian-related problems.
MicroStrategy admitted that its Bitcoin-focused strategy is relatively untested in varying economic conditions.
It added:
“[So], if bitcoin prices were to decrease or 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 impacted.”
Crypto advisory role
Meanwhile, Saylor has expressed openness to a crypto advisory role in the incoming Donald Trump administration.
In a recent Bloomberg interview, the Bitcoin bull emphasized his willingness to contribute to developing constructive digital asset policies that would foster growth and development.
According to him:
“I’m always willing to provide thoughts on constructive digital assets policy in confidence or publicly and if I’m asked to serve on some sort of Digital Assets Advisory Council I probably would do so.”
Notably, Saylor is not the only crypto stakeholder willing to work with the impending Trump administration, which has made several pro-crypto appointments in recent weeks.
