The Analytics software company sold about 704 Bitcoins for $11.8 million on the premise that a loss on the transaction would offset previous capital gains; then the company acquired an additional 810 bitcoins for $13.6 million, bringing its total holdings up to 132,500 bitcoins.
According to a statement released by MicroStrategy on Wednesday, the company purchased 2.4 thousand Bitcoins between November 1 and December 21 for a total of $42.8 million in cash, or an average price of $17.9 thousand per BTC. On December 22, at an average price of $16.8 thousand per Bitcoin, the company sold 704 Bitcoins for $11.8 million. The capital losses from this sale will be offset by prior capital gains, according to MicroStrategy. At an average cost of $16.8 thousand per Bitcoin, the company purchased 810 of them on December 24 for $13.6 million in cash.
As of December 27, MicroStrategy had 132.5 thousand Bitcoins in total, up from 130 thousand Bitcoins as of October 31. The cost of the company’s Bitcoin holdings was $4.03 billion, with an average purchase price of $30.4 thousand per bitcoin.
A status report on MicroStrategy’s $500 million stock offering was also supplied. In total, MicroStrategy earned $46.4 million in net revenues from the issuance and sale of 218.6K shares from October 1 to December 27 at an average gross price of $213.16 per share.
MicroStrategy’s cryptocurrency holdings are currently valued slightly over $2.19 billion, with bitcoin trading at a price of $16,590 at the time of writing. That equals to almost $2 billion in paper losses.
Why is MicroStrategy selling then buying back in? (Tax-Loss Harvesting)
When you submit your income tax return for the year, you must pay capital gains taxes if you sell a profitable stock, receive a dividend, or a mutual fund makes a profit.
By selling investments such as stocks, bonds, mutual funds, and ETFs at a loss, you will be able to balance the taxes due on capital gains made in other parts of your portfolio, controlling and minimizing your tax burden. As a result, investing becomes more tax-efficient. Even taxes payable on regular income can be mitigated by tax-loss harvesting.
Since short-term capital gains are typically taxed at a greater rate than long-term capital gains, this method is most frequently employed to reduce the amount of taxes owed on those gains. Long-term financial gains could, however, also be offset using this strategy.
MicroStrategy and Michael Saylor’s investment strategy
In 2020, MicroStrategy adopted Bitcoin as an inflation hedge. The developer of analytics software, led by proponent of Bitcoin bull Michael Saylor, has benefited from any decline in price of the cryptocurrency by increasing the amount of Bitcoin it has invested in it.
Thoughts of a protracted “crypto winter” have caused Bitcoin to move in lockstep with other cryptocurrencies as they plummet, proving this tactic to be a dangerous gamble. The question at hand is whether this slide sets off a margin call, which would compel Saylor’s business intelligence company to sell some of its holdings.
The company would never sell its Bitcoin assets, according to MicroStrategy CEO, who anticipates the price of Bitcoin to reach $6 million. The executive also disclosed his personal ownership of 17,732 Bitcoins, saying that the popular cryptocurrency is “unstoppable” and will displace gold.
Backlash against Saylor
On Twitter, Michael Saylor is currently receiving a significant amount of criticism. He is allegedly accused of deceiving individuals by telling them to sell their possessions, including their homes, in order to purchase Bitcoin. People are currently at a loss after the collapse of Bitcoin.
Investors are always urged to conduct their own research before investing money in cryptocurrencies because the crypto market is highly volatile. Bitcoin has also been hailed as a store of value, which means that it is more suitable for long-term investment than short-term.
People have the tendency to speak in absolute statements. This can be observed throughout life, but it is most prevalent in public discourse. Absolute statements frequently result in a prepared response while neglecting the facts at hand. Avoid listening to folks who use absolutes when you are making decisions. Watch out for speakers who provide their opinions without having any actual knowledge of your circumstances.
Rickie Sanchez is an article writer specializing in cryptocurrency news. Since late 2017, he has been actively investing in cryptocurrencies. He is enthusiastic about everything that has to do with crypto and he hopes that the readers of his articles in the years to come will gain a massive understanding of blockchain technology.