Shares of MicroStrategy, one of the largest corporate holders of Bitcoin, dropped more than 19% on the last trading day towards a four-month low. The losses came after Bitcoin tumbled to below $16,000 over the past day amid growing uncertainty around the fate of FTX, which is one of the world’s largest crypto exchanges and suffering from an acute liquidity crunch. The year has not fared well for the business intelligence firm, whose shares are now down 69.48% year-to-date.
Microstrategy Suffers From Bitcoin Price Drop
Microstrategy, whose main business revolves around making enterprise analytics and mobility software, has been involved in a Bitcoin play, acquiring and holding the cryptocurrency as a treasury reserve. Since late 2020, the company has invested millions of dollars in the flagship cryptocurrency in a bid to hedge against inflation and diversify its portfolio.
As reported, the company’s bold bet on BTC initially paid off well, particularly in early 2021 when the leading cryptocurrency was rallying. The company’s stock, which was trading at around $130 per share when the company adopted bitcoin, hit a record high of $1,272 in early 2021, posting an increase of more than 1,000%.
However, the recent crypto meltdown continued to wear away the value of Microstrategy’s Bitcoin holdings. So much so that the company took a non-cash digital impairment charge of $170.1 million in the first quarter of the year, and another $917.8 million digital asset impairment charge in Q2.
As of now, the company owns 130,000 BTC, worth over $2.1 billion at current rates. The average purchase price was $30,623 per coin with a total cost of $3.981 billion, according to data accumulated by Buy Bitcoin Worldwide. Therefore, the company is currently down by more than $1,8 billion on its Bitcoin investment.
The poor performance of Bitcoin has also negatively impacted MicroStrategy shares, which closed the last trading day down by more than 19%. The company’s shares are down by 69% YTD.
Crypto Prices Crash as Binance Walks Away from FTX Deal
Binance signed a letter of intent to acquire FTX on Tuesday, although at the time it said the agreement was subject to a due diligence process. On Wednesday afternoon, Binance announced that it has decided to back out of the potential FTX deal after doing due diligence.
The exchange claimed FTX mishandled users’ assets and also cited allegations of regulatory probes. “Our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance said.
Following the news, cryptocurrency prices went into a free fall. Bitcoin dropped to as low as $15,682, a level not seen in two years, losing around 8% over the past 24 hours. Ethereum, the second-largest cryptocurrency, has also dropped to $1,083, down by around 4% over the past day.
While the FTX downfall might seem so sudden, its roots actually go back months, when SBF stepped in to save other crypto firms as the crypto market collapsed, according to a recent Reuters report. Citing people familiar with the company’s operations, the report said SBF suffered huge losses from some of those deals.
While the entire crypto market is still deep in the red, major cryptocurrencies have managed to trim some of their recent losses. Bitcoin is currently trading at around $16,287, up from its daily low of $15,682. Ethereum is trading at $1,175, up from the local low of $1,083.