Strategy’s Bitcoin holdings have moved back into profit after Bitcoin’s sharp recovery pushed the cryptocurrency above the company’s average buying price. Strategy, formerly known as MicroStrategy, holds about 840,447 Bitcoin (BTC), with an average purchase price of $75,385 per Bitcoin.
The company has spent about $63.36 billion to build its Bitcoin holdings. Bitcoin’s rally pushed the market value of Strategy’s holdings above $66 billion, as the cryptocurrency broke through the company’s average cost and briefly moved above $81,000. At the peak of the rally, Strategy’s unrealized or “paper” profit reached about $4.7 billion, according to Yahoo Finance.
This was a major turnaround from just a week earlier. When Bitcoin was trading near the low-$60,000 range, Strategy was sitting on an estimated $9.5 billion unrealized loss. The sharp change shows how strongly Strategy’s finances are linked to Bitcoin because of the huge amount of cryptocurrency it owns.
Strategy’s Bitcoin profit changes quickly
Bitcoin’s move from around $60,000 to above $81,000 created a valuation swing of roughly $14 billion for Strategy’s Bitcoin holdings. Strategy’s huge Bitcoin position means even small moves in the cryptocurrency can have a major impact on the company’s holdings. For every $1,000 move in Bitcoin, the value of Strategy’s holdings changes by about $840 million, based on its roughly 840,000 BTC holdings, according to Yahoo Finance.
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This makes Strategy one of the most visible examples of a company with large institutional exposure to Bitcoin. The key level for Strategy is its average purchase price of $75,385 per Bitcoin. When Bitcoin trades above $75,385, Strategy’s overall Bitcoin position is in unrealized profit. When Bitcoin falls below that level, the company’s Bitcoin holdings move back into an unrealized loss.
When Bitcoin reached around $81,000, Strategy’s Bitcoin holdings were worth about $68.1 billion, compared with the company’s $63.36 billion purchase cost. However, the gains are not guaranteed. A fall in Bitcoin back toward Strategy’s average cost could quickly reduce or erase the company’s paper profits.
Strategy builds cash instead of buying Bitcoin
Strategy did not announce a new Bitcoin purchase during the latest rally. Instead, the company increased its cash reserves after selling 18.26 million MSTR shares for about $2.01 billion. Strategy reportedly kept $1.59 billion in a separate cash reserve that could support future Bitcoin purchases.
Its main US dollar reserve also increased to about $5.1 billion. Strategy also repurchased about $136 million worth of its STRC preferred stock. The company’s most recent reported Bitcoin transaction was a sale of 1,690 BTC on August 10.
The sale shows that Strategy can make limited Bitcoin disposals even though executive chairman Michael Saylor has repeatedly promoted the strategy of accumulating and holding Bitcoin, according to Yahoo Finance. Saylor has described the growing use of Bitcoin by exchange-traded funds, corporate treasuries and regulated custodians as an evolution of the cryptocurrency market rather than a move away from Bitcoin’s original principles.
Bitcoin rally hits short sellers
Bitcoin’s move above $80,000 marked its highest level since mid-May. The cryptocurrency’s weekly gain reached roughly 25% during the rally. The sharp rise also hurt traders who had bet that Bitcoin would fall. More than $260 million in short positions were reportedly liquidated within four hours as Bitcoin moved higher.
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Total daily crypto liquidations approached $650 million, showing how violent the market move was. Bitcoin’s technical picture also improved during the rally. Market observers said Bitcoin moved above its 20-day, 50-day and 200-day exponential moving averages against the US dollar and several traditional assets.
“Bitcoin is consolidating around $79,000 as traders await key US macro data, including PCE inflation and GDP figures. While the broader uptrend remains intact, Bitcoin needs a sustained close above its 365-day moving average near $83,000 to confirm a stronger bullish breakout”, Prateek Gupta, Head of Business at Mudrex, told Hindustan Times.
Bitcoin rally lifts other cryptocurrencies
The rally was not limited to Bitcoin. Other major cryptocurrencies also moved higher. Ether climbed above $2,500 after gaining roughly 32% in a week. XRP moved above $1.50 during the broader crypto rally. Solana also climbed back above $100. For Strategy, however, Bitcoin’s next move remains especially important because of the company’s enormous Bitcoin holdings, according to Yahoo Finance.
If Bitcoin stays above Strategy’s $75,385 average purchase price, the company can maintain its return to unrealized profitability. But if Bitcoin suffers another sharp decline, Strategy could quickly face multibillion-dollar unrealized losses again. The dramatic move from an estimated $9.5 billion paper loss to a $4.7 billion paper profit in about a week highlights both the size of Strategy’s Bitcoin bet and the extreme volatility that comes with it.