MicroStrategy, previously known as Strategy, asserts that its aggressive Bitcoin investments have resulted in nearly a $2 billion profit this year despite the asset’s notable price volatility. However, an examination of the company’s mandatory regulatory filings reveals a different picture: under traditional accounting standards, it is facing substantial unrealized losses with its entire Bitcoin portfolio significantly underwater.
Undeterred by these paper losses, MicroStrategy continues to aggressively buy Bitcoin using equity issued through its liquid capital markets framework, despite a stark contrast between its optimistic internal reports and the sobering reality presented in SEC filings.
The company claims exceptional performance of its Bitcoin investment strategy. On X, it announced that since January, this approach has generated approximately $1.7 billion in gains from Bitcoin purchases. MicroStrategy highlights its acquisition rate as 2.2 times the newly mined Bitcoin supply, amounting to over 94,000 BTC.
The firm uses two proprietary metrics: “BTC Yield” and “BTC Gain.” It reports a BTC Yield of 3.7% for the year, leading to a BTC Gain of 24,675 coins, valued at around $1.7 billion. These figures suggest success in its leveraged accumulation strategy.
MicroStrategy’s accounting method rewards balance sheet growth per share. The company describes BTC Yield as the percentage change in Bitcoin Per Share from the start to end of a period, and BTC Gain converts this into an absolute number by multiplying the initial Bitcoin quantity by BTC Yield. BTC $ Gain further multiplies BTC Gain by Bitcoin’s market price.
However, SEC filings reveal that these gains are overshadowed by a significant accounting deficit. For Q1 2025, the company reported a $14.46 billion unrealized loss on its digital assets due to fair-value accounting rules requiring income statement reflection of price fluctuations. Consequently, the value of its digital assets dropped from $58.85 billion to $51.65 billion.
The total cost basis is also negative. Having purchased heavily through Q1 at an average price of $75,644 per coin, totaling 766,970 BTC for $58.02 billion, the current market value of about $54.60 billion leaves it roughly $3.41 billion under its acquisition cost.
Despite this, MicroStrategy continues purchasing Bitcoin without selling any holdings, supported by STRC preferred stock issuance, which trades closely to par and has seen high trading volumes, funding further acquisitions.
While equity offerings remain steady, potential risks arise from the company’s disclosures. The reported metrics do not account for liabilities or preferential rights of preferred shareholders during liquidation. Increasing reliance on non-convertible notes and preferred stock could inflate BTC-related metrics while raising indebtedness and senior claims.
The annual report warns that the software business may not generate enough cash flow to meet financial obligations over the next year, necessitating continuous financing. Any significant drop in Bitcoin’s market value or adverse investor sentiment might hinder the firm’s ability to secure necessary financing, potentially forcing it to sell Bitcoin.
Despite these risks, MicroStrategy maintains its aggressive purchasing strategy, with STRC issuance continuing to fund operations and a marketing dashboard still showing positive Bitcoin gains.