The price of the currency has plummeted. Has it fallen below the holding costs of mainstream institutions?

Author | Qin Xiaofeng Editor | Hao Fangzhou

Produced by | Odaily Planet Daily (ID: o-daily)

Recently, the crypto market has experienced a major correction.

Bitcoin fell below the $40,000 and $30,000 mark, and the prices of other cryptocurrencies were basically cut in half. "Coin circle crash" became a hot search on Weibo. Various negative news that were difficult to distinguish between true and false were also widely spread in social networks, further panicking crypto investors.

Although there has been a short-term correction, investors can't help but wonder: Is the bull market really over?

Since this round of bull market is mainly driven by the entry of institutional users, Odaily Planet Daily decided to study the institutional Bitcoin holding costs to help investors better judge the market.

According to CCTV Finance, there are currently 22 listed companies holding Bitcoin in the world, holding more than 180,000 Bitcoins with a total market value of more than US$9.84 billion. Given that more than half of these companies hold less than 500 BTC and do not disclose their holding costs (Bitfarms, Riot Blockchain and other mining companies), this article focuses on 8 of these listed companies that directly purchased BTC from the secondary market as the analysis objects. The statistical results are as follows:

From the statistical results: Galaxy Digital has the lowest average holding cost among the eight companies, which is only $8,163; Nexon, Aker ASA and Meitu, which entered the market later, have relatively high costs, reaching $50,000. The average Bitcoin holding cost of the eight companies is $26,029, which is not far from the recent market low of $29,000, and seems to indicate that the market has bottomed out in the short term. Especially considering that Tesla and other companies with a relatively large share will face serious losses when they sell at less than $35,000, the market is expected to pick up in the future.

The details of each company are as follows:

MicroStrategy

Microstrategy (NASDAQ: MSTR) is one of the most outstanding listed companies in this round of "institutional bull market".

MicroStrategy is a company that provides business intelligence (BI), mobile software, and cloud-based services. Its main business analytics competitors include SAP AG Business Objects, IBM Cognos, and Oracle Corporation's BI platform. MicroStrategy's full-year revenue in 2020 was $480 million, and its current market value is $4.6 billion.

On August 12, 2020, MicroStrategy announced that it had officially adopted Bitcoin (BTC) as its main reserve asset.

In the following months, MicroStrategy began a crazy buying spree. According to the first quarter financial report of this year, as of March 31, 2021, MicroStrategy held a total of 91,579 bitcoins, and the book value of digital assets (consisting only of bitcoins) was US$1.947 billion. In the second quarter, MicroStrategy purchased a total of 500 BTC on May 13 and 18.

As of May 18, MicroStrategy held a total of 92,079 bitcoins, ranking first among all listed companies, with a cost of approximately US$2.251 billion and an average price of US$24,450 per BTC (a large number of low-priced BTC were purchased last year to spread the cost).

Previously, MicroStrategy CEO Michael Saylor said that entities controlled by him had accumulated 111,000 bitcoins and had not sold a single satoshi. This total includes MicroStrategy's 92,079 BTC and may include Saylor's personal bitcoin reserves.

Tesla

Tesla CEO Elon Musk can make the crypto market go crazy. A tweet can make Bitcoin go up or down by tens of thousands of dollars, and can multiply Doge and SHIB by several times.

This year, Tesla did two things that had a profound impact on the crypto market.

On February 8, Tesla announced in a notice submitted to the U.S. Securities and Exchange Commission (SEC) that the company plans to purchase $1.5 billion worth of Bitcoin. Influenced by this news, Bitcoin rose from $38,800 to $48,200 that day, breaking the historical high again.

On March 24, Tesla’s official website in the United States announced support for Bitcoin payments. On the same day, Bitcoin rose by more than 10% again, and Tesla became the first car company in history to support Bitcoin purchases.

However, Musk soon "broke" his vow. On May 12, Musk announced on Twitter that Tesla would suspend its plan to accept Bitcoin as payment for its cars, citing "unfriendly environment" as the reason. "We are concerned about the rapid increase in fossil fuel use in Bitcoin mining and trading, especially coal, which has the worst emissions of all fuels."

Less than two hours after the tweet was published, the price of Bitcoin plummeted from $54,819 to $45,700, the lowest since March 1.

Next, let's return to the core question: what is the cost of Tesla's Bitcoin holdings? Since its financial report does not directly disclose the specific amount, it also adds a bit of mystery, but we can still roughly calculate it.

The first quarter financial report shows that Tesla holds $1.331 billion in "digital currency". According to the prevailing accounting rules, digital currency is classified as an "indefinite intangible asset". If the price of Bitcoin is higher than the price when the company purchased it at the end of a quarter, the holder cannot show this appreciation in the financial report, and the value of the position must still be shown as the amount the company originally paid, that is, the "book value". In other words, the $1.331 billion is the remaining BTC holding cost of Tesla. In other words, Tesla sold a portion of Bitcoin in the first quarter (the cost of that portion of the holding was $169 million).

The financial report also shows that Tesla earned $272 million in revenue (net profit of $101 million) from the sale of Bitcoin, and the cost accounted for 62.14% of the revenue. Tesla's Chief Financial Officer Zach Kirkhorn said in a conference call that the transaction took place in "late March", when the average price of Bitcoin was $55,100. From this, we can infer that Tesla's average Bitcoin holding cost is 55,100*62.14%=34,239 US dollars, which is in line with the average monthly price of Bitcoin from the end of January to February. At present, Tesla has 38,873 Bitcoins left.

On May 17, Musk tweeted that "Tesla has not sold any Bitcoin." But judging from the financial report, this statement is somewhat untenable.

Beautiful pictures

As a well-known national technology company, Meitu’s connection with the crypto market can be traced back to MeChain (BEC) in 2018. This year, Meitu is back again.

On March 7, Meitu Inc. issued an announcement stating that the group purchased 15,000 units of Ethereum and 379.1214267 units of Bitcoin in open market transactions on March 5, 2021. The total consideration for the two cryptocurrencies was approximately US$22.1 million and US$17.9 million, respectively.

Cai Wensheng, the founder of Meitu, wrote in his WeChat Moments, "Meitu continues to deploy blockchain, and this time purchased ETH and BTC digital currencies as value reserves for the long-term development of the blockchain strategy." He said that Meitu is the first Hong Kong-listed company to purchase BTC digital currency, and also the first listed company in the world to use ETH as a currency value reserve.

On March 17, Meitu announced again that its wholly-owned subsidiary Miracle Vision further purchased 386.08 units of Bitcoin for a total consideration of approximately US$21.6 million; and 16,000 units of Ethereum for a total consideration of approximately US$28.4 million.

On the evening of April 8, Meitu issued another announcement that its wholly-owned subsidiary Meitu Hong Kong purchased 175.67798279 units of Bitcoin for a total consideration of approximately US$10 million.

Based on the above data, Odialy Planet Daily calculated that Meitu invested a total of $49.5 million to purchase 940.89 BTC, with an average holding cost of $52,610. Based on the current price of $35,000, Meitu's floating loss is 33%, or about $16.33 million.

Galaxy Digital

Galaxy Digital has always been known as the "Goldman Sachs of the crypto market". The founder of Galaxy Digital is Michael Novogratz, who worked at Goldman Sachs for 11 years and served as a partner.

In November 2017, Galaxy Digital was officially established. In May 2018, Galaxy Digital merged with Canadian company First Coin Capital Corp. to form a limited partnership, Galaxy Digital Holdings LP, which was later Galaxy Digital's main operating entity. In August 2018, Galaxy Digital acquired Bradmer Pharmaceuticals Inc., a pharmaceutical company listed on the Toronto Venture Exchange, and changed its name to the holding company Galaxy Digital Holdings Ltd., achieving a backdoor listing.

Galaxy Digital has four main businesses: asset management, principal investment, trading, and advisory service. Its more famous investment cases include Galaxy Digital's investment in Block.one (EOS development team), lending platform BlockFi, etc.

In the June 2020 financial report, Galaxy Digital had 14,651 BTC with a fair value of $1.338 billion and an average unit price of $9,138; in the latest first quarter financial report, Galaxy Digital had 16,402 bitcoins on its latest balance sheet, and the number of bitcoins increased. In the financial report, Galaxy Digital explained that the increase in Bitcoin holdings mainly came from contributions from non-controlling equity to the Bitcoin Fund, which can understand Galaxy Digital's external investment return income. Therefore, its average cost was further reduced to $8,163.

Marathon Patent Group

Marathon Patent Group (NASDAQ: MARA) was founded in 2010 and changed its name to its current name in 2013. The company is a digital asset technology company dedicated to cryptocurrency mining. They purchased mining machines and built a data center in Quebec, Canada for mining.

In 2017, Marathon was listed on the Nasdaq in the United States. At its peak that year, its market value was only US$50 million. Over the past year, due to the rise in the value of cryptocurrencies, it has grown more than 40 times and currently reaches US$2.177 billion.

According to the official announcement, as of May 6, 2021, Marathon holds about 5,324 bitcoins, which are made up of two parts: mining and secondary market purchases. Among them, Marathon purchased 4,812.66 BTC at an average price of $31,168 in January this year, with a total cost of $150 million. At the current average price of $35,000, the return rate is 12.3%.

Square

As early as 2018, Square's mobile payment service Cash App launched Bitcoin trading, allowing users to buy and sell Bitcoin.

Square (NADQ:SQ) is a mobile payment company in the United States, founded by Jack Dorsey (one of the co-founders of Twitter). Square users can use the mobile card reader provided by Square with a smartphone, and can match card payments through the application in any network state. It allows consumers and merchants to pay and receive payments anywhere, and save the corresponding consumption information, thus greatly reducing the technical threshold and hardware requirements for card payment. Currently, Square's market value is 93.3 billion US dollars.

On October 10, 2020, Square said that it had purchased 4,709 bitcoins with a total value of approximately $50 million. On February 24, 2021, Square again bought approximately 3,318 bitcoins for $170 million. So far, Square has 8,027 BTC at a total cost of $220 million, with an average holding cost of $27,407 per BTC.

"Bitcoin has the potential to become a more ubiquitous currency in the future, and as its adoption grows, we intend to learn and engage in a more compliant way," said Amrita Ahuja, CFO of Square. "For a company that is on a path to building a more inclusive future product, this investment is a critical step along that path."

The recent "Bitcoin is not environmentally friendly" theory led by Musk has also hindered Square's plan to purchase more Bitcoin. Amrita Ahuja said that Square currently has no plans to buy more Bitcoin, and Bitcoin's carbon footprint must be addressed, and urged the wider adoption of green energy.

Nexon

If you have played games like KartRider and Dungeon & Fighter, then you must have heard of the Korean online game giant Nexon.

The company was founded in 1994 and currently has more than 60 games available in more than 190 countries. Nexon was first listed on the Tokyo Stock Exchange in December 2011 and was included in the Nikkei 400 in 2015; by 2020, Nexon was included in the Nikkei 225. Currently, Nexon's market capitalization is approximately US$71 million.

On April 27, 2021, Nexon announced that it had purchased 1,717 bitcoins for approximately $100 million, with an average price of $58,226.

Nexon CEO Owen Mahoney explained: “Our purchase of Bitcoin is a strategic arrangement that protects shareholder value and maintains the purchasing power of our cash assets. In the current economic environment, we believe Bitcoin provides long-term stability and liquidity while preserving the value of cash for future investment.”

Aker ASA

Aker ASA is a Norwegian holding company with a market value of US$6 billion, mainly engaged in offshore fishing, construction and engineering. The company was founded in 2004 and is headquartered in Oslo, Norway. Its name comes from the former Akers mekaniske Verksted, which closed in 1982.

In March this year, Aker ASA announced the establishment of Seetee, which specializes in investing in Bitcoin projects and companies. The company's website reads: "Bitcoin is our inventory asset, and our strategy is Hodl."

Aker ASA provided Seetee with an initial capital of 500 million Norwegian kroner (58 million U.S. dollars) in the first phase. The new company will hold all its liquid funds to invest in BTC, purchasing a total of 1,170 BTC at an average cost of $50,085.

Conclusion

This study is based on some assumptions and may have shortcomings.

Some of the latest data of US stock companies are not shown in the chart. For example, recently Mogo Inc. (NASDAQ: MOGO) announced the purchase of 18 BTC at an average price of $33,083... Although these companies are small and the amount of capital invested is not large, it reflects that the traditional financial market is becoming more and more tolerant of cryptocurrencies such as Bitcoin and is willing to add them to its balance sheet.

As more companies join in and form a strong buying force, the crypto market will also usher in new development opportunities.