MicroStrategy reports $170 million impairment loss on Bitcoin holdings in Q1

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MicroStrategy, the largest publicly-traded business intelligence company, announced in its financial results for the first quarter of 2022, that the company bore a non-cash digital asset impairment charge of $170.1 million, up from last quarter. The fourth quarter of 2021 had the company taking digital asset impairment charges worth $146.6 million.  

Standard accounting rules say that the value of digital assets, including cryptocurrencies, should be recorded at the cost price and only adjusted if their value goes down. In an opposite-case scenario, when the digital asset price rises, the asset value doesn’t get adjusted unless the firm sells it. Digital asset impairment is a figure that reflects the decrease in the price of Bitcoin or any other digital asset against the price at which it was acquired. 

MicroStrategy also made an announcement about Andrew Kang Lee taking on the position of the chief financial officer, while Phong Le, who earlier held this position will continue as its president. Phong Le had earlier served at the tech company Greensky Inc. The officials would take charge of their positions officially from May 9. 

MicroStrategy had reported $71 million yearly impairment losses in 2020, which increased to $831 million in 2021. The total bitcoin holdings of 129.218 bitcoins as of March 31st, 2022, were acquired at $3.97 billion. The average cost of one bitcoin comes to $30,700. Considering Bitcoin’s current price, the average price per coin comes to $37,662, with a total valuation of $4.9 billion. 

MicroStrategy added 4,167 bitcoins to its portfolio between February 15 and April 4. The total cost of these bitcoins was $190.5 million, with each bitcoin costing $45,714. This bitcoin acquisition comes in the wake of Microstrategy securing a $205 million loan from Silvergate Bank (SI) backed by its existing BTC holdings to buy more bitcoins.