The recent slump in the price of Bitcoin (^BTCUSD) last month to a 1-1/2 year low could hurt the earnings of some tech companies that held cryptocurrencies as assets on their books. According to Bloomberg calculations, Tesla (TSLA), MicroStrategy (MSTR), and Block Inc (SQ) took an estimated hit of $5 billion on their holdings of Bitcoin in Q2.
Bitcoin has plunged -59% this year through June 30, and Tesla locked in some of the declines after the company reported Wednesday that it liquidated most of its Bitcoin in Q2. Tesla said, “as of the end of Q2, we have converted approximately 75% of our Bitcoin purchase into fiat currency.” Bitcoin has tumbled from a record high of almost $69,000 in November to a 1-1/2 year low of $17,000 in June.
The sharp decline in Bitcoin shows the danger that companies face when they decide to put their corporate assets, normally held in cash or ultra-safe short-term Treasuries, into volatile cryptocurrencies. Treasury Partners, a firm that manages cash for corporations, said, “it’s very risky for companies to purchase Bitcoin, which is an extremely volatile asset, and puts the company’s cash at risk of severe losses.”
According to data from CoinGecko, there are at least 27 public companies with Bitcoin on their balance sheets. Although most of the companies are cryptocurrency miners and financial service firms, more than 85% of the Bitcoins held at public companies were with software company MicroStrategy, carmaker Tesla, and payments provider Block Inc.
The CEOs of MicroStrategy and Block Inc. are big proponents of Bitcoin and cryptocurrencies. MicroStrategy CEO Saylor has paid almost $4 billion to buy 129,699 Bitcoins. Based on recent price moves, the tokens dropped in value by $3.4 billion in Q2. Block, run by Twitter co-founder Dorsey, owned $366 million of Bitcoin on March 31, according to a company statement. Investors will be watching earnings from MicroStrategy and Block on August 2 and August 4, respectively, to see how big a write down each take on their Bitcoin holdings.
More Stock Market News from Barchart
/Microsoft%20Corporation%20logo%20on%20phone-by%20rafapress%20via%20Shuterstock.jpg)
