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Strategy (previously Microstrategy), the software company that has transformed into a Bitcoin (BTC) proxy, is set to report an unrealized $5.9 billion loss in the first quarter of 2025.
This is the result of a recent accounting change that requires the company to value its BTC holdings at current market prices. Following the announcement, the company’s shares plunged as much as 14% on Monday.
Bitcoin Holdings Plunge Nearly $5 Billion Amid Price Decline
According to Bloomberg, the company’s shift in accounting practices, approved last year, requires firms to acknowledge unrealized gains and losses on their digital assets. This adjustment has led to significant fluctuations in earnings, with Strategy being notably affected.
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Until now, the Tysons Corner, Virginia-based firm had classified its Bitcoin holdings as “intangible assets,” akin to trademarks or brand recognition. This classification meant that the company had to permanently write down the value of its holdings when Bitcoin prices fell, with any gains only being recognized upon sale.
The first-quarter loss includes approximately $1 billion in paper losses stemming from Saylor’s aggressive purchasing strategy, which has seen the company invest around $7.79 billion in Bitcoin since 2025.
As of the beginning of this year, MicroStrategy owned $41.8 billion in Bitcoin, but the value of these holdings dropped nearly $5 billion in the first quarter alone due to a 12% decline in BTC’s price. Bloomberg estimates that this translates to about $6 billion in “mark-to-market” losses as of March 31, prior to taxes.
Strategy Faces Sell Rating As BTC Struggles
Interestingly, the adoption of the new accounting standard is also expected to create a positive shift in the company’s retained earnings, thanks to an almost $13 billion boost from recognizing its Bitcoin holdings at market value.
Strategy made headlines in 2020 by becoming the first public company to adopt Bitcoin as a cornerstone of its capital strategy, with Saylor asserting that this move was essential for the company’s survival.
The strategy has attracted significant attention from Wall Street, turning Strategy’s stock into a proxy for Bitcoin investment. Since August 2020, the stock has surged more than 2,200%, fueled by investor speculation and demand.
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In a bid to capitalize on this interest, Saylor has raised capital through various means, including equity offerings and convertible debt. Hedge funds have been interested in these convertible bonds, looking to profit from the stock’s volatility through short-selling strategies.
However, with Bitcoin’s recent price struggles, alongside a broader downturn in risk assets, the rapid appreciation of Strategy’s shares has begun to decelerate.
Last week, the company received its first sell rating from the boutique equity research firm Monness, Crespi, Hardt & Co., which expressed concerns that the market for the securities used to fund Bitcoin purchases is becoming increasingly saturated.
Featured image from DALL-E, chart from TradingView.com
