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23 June 2021

Why MicroStrategy's Latest $400 Million Bitcoin Buy Is Different From the Others - Decrypt

Why MicroStrategy's Latest $400 Million Bitcoin Buy Is Different From the Others - Decrypt


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Why MicroStrategy's Latest $400 Million Bitcoin Buy Is Different From the Others.

Cloud software company MicroStrategyannouncedtoday that it intends to buy an additional $400 million in Bitcoin to add to the 92,079 BTC ($3.3 billion) it already holds in its treasury.

In this case, institutions can purchase debt in MicroStrategy, which the company will then use to buy more Bitcoin, which it believes will increase in value (or at least hold its value better than dollars).

AsBloombergnotes: "The private placement is $23 million higher than the company’s entire operating cash flow since 2016." MicroStrategy, ostensibly a cloud software and analytics company, has basically become a publicly traded Bitcoin fund.

As if to underline the point that it's playing a high-risk game with a volatile asset, MicroStrategyposted SEC filingson its website today indicating that the company was taking an impairment loss of $284.5 million "based on the fluctuations in market price of bitcoin during the second quarter of 2021." Its total impairments are up to $500 million, perBloomberg.

An impairment loss reduces the value of an asset on a company balance sheet to the lowest price that quarter, meaning MicroStrategy is now officially valued at less than it was last week.

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