Strategy’s bitcoin gains narrow ahead of third-quarter results
Strategy enters its third-quarter earnings report with bitcoin trading only modestly above the company’s average purchase price. The move leaves the biggest corporate holder of the token with an unrealized gain of about 6% and adds pressure as the fourth quarter begins with weaker prices.
Highlights
- Strategy holds 848,517 bitcoin valued at about $68 billion, with paper gains narrowing to $4 billion as bitcoin trades near $80,000.
- Strategy reversed a $4.12 billion tax write-down in Q3 as bitcoin prices recovered above its average purchase price of $75,446, temporarily boosting profit.
- Strategy did not add to its bitcoin holdings through Oct. 25 and instead used cash to repurchase STRC preferred shares amidst wider market pressure.
Bitcoin position and earnings backdrop
As reported by CoinDesk, Strategy is due to report third-quarter results after the U.S. market close on Thursday, with its 848,517 bitcoin now valued at about $68 billion. The company said in an Oct. 26 filing that it bought the holdings at an average price of $75,446 per coin, implying total spending of about $64 billion and a paper gain of roughly $4 billion with bitcoin near $80,000.The margin has narrowed materially from the end of September. Strategy’s Oct. 5 filing valued its bitcoin at about $83,500 each at quarter-end, so the subsequent decline in the token translates into roughly $3 billion in paper losses early in the fourth quarter, which still has two months left to run.
Tax effects and broader market pressure
A tax accounting shift is also shaping the quarter’s profit picture. In June, when bitcoin was trading below Strategy’s average purchase price, the company wrote off a $4.12 billion tax asset that could be used against future tax liabilities, then reversed that write-down in the third quarter, adding about $4 billion to profit.By CoinDesk’s calculations, that tax credit begins to return if bitcoin falls below $75,446 and is fully restored near $58,500. Pressure is not limited to Strategy, as Glassnode estimates buyers of U.S. spot bitcoin ETFs paid about $81,500 on average, leaving many investors underwater at current trading levels.
Strategy also does not add to its bitcoin holdings in the week through Oct. 25. Instead, it uses cash to buy back its STRC preferred shares.
In our earlier article on the Philippine Social Security System (SSS), we covered how the state pension fund defended its equity strategy by separating unrealized (paper) losses from realized gains and dividend income. SSS said it has generated P204 billion in realized gains and dividends since 1968 and argued that mark-to-market declines only become actual losses if holdings are sold below cost, while long-term positions and recurring income help cushion volatility.
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