MicroStrategy Ordinals Move Comes After $191.6 Million Impairment Charge
Despite heavily investing in Bitcoin, Saylor's Microstrategy has significant impairment loss. | Credit: Jason Koerner/Getty Images for Bitcoin Magazine
Key Takeaways
- MicroStrategy unveiled an initiative to develop DID based on Ordinals after an underwhelming financial report.
- Despite its Bitcoin investments, MicroStrategy reported a net loss due to a large impairment charge on BTC holdings.
- The company’s revenue dipped while operating expenses soared.
- MicroStrategy remains bullish on Bitcoin, despite the $191.6 million impairment charge.
MicroStrategy, a company specializing in Bitcoin (BTC) development, reported a net loss of $53.1 million for the first quarter of 2024, equivalent to $3.09 per share. The impairment loss stood at $191.6 million.
As a new strategy, the company recently revealed its new initiative called ‘MicroStrategy Orange’. This was designed to develop a decentralized identity service based on Ordinals inscriptions.
MicroStrategy Unveils A Decentralized Identity Service on Bitcoin
MicroStrategy recently recognized as the largest corporate holder of Bitcoin, has unveiled a new initiative to develop a decentralized identity service based on Ordinals inscriptions. This year, the company transitioned its focus to become a “Bitcoin development company,” dedicated to enhancing the Bitcoin network through advancements in financial markets, advocacy, and technology. The initiative, named “MicroStrategy Orange,” is a direct application of this strategic shift.
At the recent Bitcoin For Corporations conference, founder Michael Saylor detailed MicroStrategy Orange’s goals. He explained that the service aims to provide decentralized identities that are “trustless, tamper-proof, and long-lasting,” securely integrated within the Bitcoin blockchain.
For Bitcoin maximalists, there is a lot of concern around this new implementation, but the company has had its hand forced after its recent impairment charge
MicroStrategy Impairment Charge Hits $191.6 Million After Bitcoin Bet
The software firm highlighted significant impairment losses on its digital assets, which totaled $191.6 million in the first quarter of 2024, a substantial increase from $18.9 million in the same period the previous year.
The loss happened even though the company made a significant investment in Bitcoin, with the majority of its wealth concentrated in cryptocurrency.
An impairment loss is an accounting expense recognized when an asset’s market value falls below its book value.
Furthermore, MicroStrategy’s revenue for the quarter was $115.2 million, marking a 5% decrease year-over-year. The company’s operating expenses for the first quarter rose to $288.9 million, up 152.8% from the first quarter of 2023.
Phong Le, President and Chief Executive Officer of MicroStrategy, stated that as the world’s first Bitcoin Development Company, MicroStrategy is dedicated to advancing the Bitcoin network through its involvement in financial markets, advocacy, and technological innovation.
The company’s distinctive Bitcoin strategy and solid operational history have enabled it to amass 214,400 bitcoins at an average purchase price of $35,180 each. In the first quarter, the company saw its subscription services revenues and subscription billings both increase at double-digit rates, indicating a successful transition of its software business to a cloud-native platform. Le expressed satisfaction with the global adoption of their cloud platform.
MicroStrategy Doubles Down on Bitcoin, Adds 25,250 BTC Since 2023
MicroStrategy has heavily invested in Bitcoin, holding the majority of its wealth in the cryptocurrency. As of April 26, 2024, the company’s total Bitcoin holdings amount to 214,400. This money was bought at an overall cost of $7.54 billion, an average of about $35,180 per Bitcoin.
Additionally, since the end of 2023, MicroStrategy has purchased 25,250 more BTC for $1.65 billion, at an average price of $65,232.
In a press release, Andrew Kang, Chief Financial Officer of MicroStrategy, stated that the company raised over $1.5 billion in the first quarter by successfully executing its capital markets strategy, which included two convertible debt offerings. He also noted that MicroStrategy acquired an additional 25,250 BTC since the end of the fourth quarter. This marked the 14th consecutive quarter of adding more Bitcoin to its balance sheet.
MSTR Credits Spot BTC ETFs for Price Surge, Saylor Remains Bullish
MicroStrategy also said the approval of spot Bitcoin exchange-traded funds (ETFs) in the US significantly contributed to Bitcoin’s price rise. This development has not only increased institutional demand, the company said, but also provided further regulatory clarity.
In March, Michael Saylor, MicroStrategy’s executive chairman and co-founder, expressed his optimism about the future of Bitcoin.
He mentioned that there is no reason to sell any of his Bitcoin holdings in the near future. He said the approval of spot Bitcoin ETFs was a positive market development that should benefit all participants.
