Coinbase and Billionaire Saylor Swept Up in Bitcoin Crash

The slump in bitcoin sharply affects companies that bet on crypto.

It’s a bitingly cold wind blowing on the crypto sphere and particularly on the king of digital currencies, bitcoin. 

Bitcoin prices are moving to their lowest levels since 2020. They have fallen more than 12% in the past 24 hours and at last check were around $23,952. 

Some observers say the drop isn’t done. Economist Adam Schiff, one of the biggest critics of bitcoin and cryptocurrencies, predicts that the most popular digital currency will drop at least as low as $20,000. 

Broadly, the crypto market has lost more than $2 trillion since November, holding a current valuation of about $1.02 trillion. 

Bitcoin alone represents a bit more than 45% of the crypto market, according to data firm CoinGecko

Bitcoin has lost more than 65% of its value since its Nov. 10 all-time high of $69,044.77.

Companies like software provider Microstrategy  (MSTR) – Get MicroStrategy Incorporated Report, electric-vehicle producer Tesla  (TSLA) – Get Tesla Inc. Report and fintech Block  (SQ) – Get Block Inc. Class A Report, formerly Square, hold bitcoins on their balance sheet. The impact of bitcoin’s slump on them ranges is sharp. 

Microstrategy Has Lost More Than $910 Million

MicroStrategy, billionaire Michael Saylor’s company, holds 129,218 bitcoins, 4,827 of which were purchased in the first quarter at an average price of $44,645. 

In all, the firm has spent some $3.97 billion on its bitcoins. After the company’s bitcoin holdings soared during crypto’s meteoric rise last November, they’re now valued at $3.05 billion, according to Bitcoin Treasuries

In other words, Saylor’s bet on bitcoin now presents a loss of at least $910 million.

No surprise, then, that Microstrategy shares slumped on June 13. At last check the stock was off 24% from Friday at $153. That’s off 72% from the start of the year.  

But the drop doesn’t deter Saylor, a bitcoin evangelist.

“In #Bitcoin We Trust,” the billionaire tweeted on June 13.

MicroStrategy implemented its bitcoin strategy in the third quarter of 2020, becoming the first established company to add digital currency to its balance sheet. One of the consequences of this decision is that the group’s stock performance substantially reflects the direction of bitcoin’s price, up or down. 

The company’s first-quarter results reflected an impairment charge of $170.1 million due to bitcoin. MicroStrategy had to reduce the value of its bitcoin holdings to better reflect changing prices. Overall, the company has booked a total impairment charge of $1.1 billion related to its bitcoin holdings.

The bitcoin debacle also affects Tesla and Block, which have invested in the cryptocurrency. Tesla holds 43,200 bitcoins and Block has 8,027.

Tesla and Block Are Also in the Red on Bitcoin

Tesla on Feb. 8, 2021, invested $1.5 billion in virtual currency and said it was beginning to accept it as payment for buying Tesla cars. The value of this investment has decreased by almost $500 million.

As for Block, run by CEO Jack Dorsey, who is also a bitcoin evangelist, the value of its investment is down by around $33 million.

The bitcoin price tumble may well be affecting the shares of both companies to one extent or another. At last check Tesla shares were down 4.6% while Block shares were down more than 10%.

Also sharply affected by the drop in bitcoin and cryptocurrencies is the crypto exchange platform Coinbase,  (COIN) – Get Coinbase Global Inc Report the most popular exchange in the U.S.

The firm’s stock at last check also was down more than 10%. Coinbase stock has lost 79% of its value this year. 

The company recently said that the prolonged period of declining cryptocurrency prices, known in the industry as the Crypto Winter, was having a big impact on its growth. Coinbase implemented cost-saving measures, including an indefinite suspension of hiring and it took back certain job offers it had made to candidates.

“In response to the current market conditions and ongoing business prioritization efforts, we will extend our hiring pause for both new and backfill roles for the foreseeable future and rescind a number of accepted offers,” L.J Brock, chief people officer, said in a blog post.

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