MicroStrategy, a US-based software company known for its extensive Bitcoin holdings, has once again made headlines with strategic moves involving its BTC reserves. On December 22, 2022, the company sold 704 BTC, generating approximately $11.8 million in revenue at a time when Bitcoin was priced at $16,776 per coin. Remarkably, just two days later, MicroStrategy repurchased 810 BTC. These transactions were part of a calculated approach to offset capital gains with capital losses, offering significant tax advantages for the business.
New accounting rules reshape balance sheet
With the adoption of the FASB fair value accounting standards on January 1, 2025, MicroStrategy began marking all its Bitcoin holdings to market prices at the end of each quarter. In the first quarter of 2026, the price of Bitcoin plummeted from $87,500 to $67,700, marking a steep 23% decline. This sharp drop resulted in MicroStrategy posting a $12.54 billion net loss on its balance sheet. Additionally, the company recorded a deferred tax asset worth $2.2 billion, largely due to high-cost Bitcoin purchases.
A key driver behind the reported loss is the fact that MicroStrategy’s average Bitcoin purchase price remains well above current market levels. During the recent earnings call, management reported that while BTC was trading near $80,000, the company held over 434,000 Bitcoin bought at above that price. As a result, unrealized losses rose to $7.6 billion.
The management team stated that the capital losses from these transactions will be used, where possible, to offset previous capital gains under current federal tax laws, providing a tax benefit to the company.
Revenue from sales and company strategy
MicroStrategy has clarified that proceeds from its Bitcoin sales are used for multiple strategic goals. Key objectives include repaying $8.2 billion in convertible debt, conducting share buybacks when the company’s market value-to-book value falls below a 1.22x ratio, and funding annual dividend payments of up to $1.5 billion on preferred shares.
The company’s overarching strategy is to increase the “Bitcoin per share” ratio—a key metric calculated by dividing total BTC holdings by the number of shares outstanding. This ratio is closely watched by investors as it demonstrates the company’s exposure to Bitcoin on a per-share basis.
Potential for a Bitcoin price rebound
If Bitcoin prices recover to previous highs and MicroStrategy capitalizes on its lower-cost holdings, the currently noted $2.2 billion deferred tax asset could be used against future profits. This would help reduce operational costs and potentially boost net earnings for the company.
After the news, MicroStrategy’s shares rose by 1% in pre-market trading, and Bitcoin continued to trade above $81,000 according to market reports.
