Crypto: Why Financial Results Can Mislead Investors
New crypto accounting rules can show gains or losses that differ significantly from the price actually paid for Bitcoin. Strategy provides an example.
Strategy sold 1,363 BTC at $59,256 in late June. Yet its reported average purchase price was $75,578. At first glance, the gap amounts to roughly $22 million. However, in its second-quarter accounts, the company reported only $900,000 in “realized” losses on digital assets. An error? No. US crypto accounting now works differently.
Crypto: Strategy illustrates the trap
The example is particularly relevant after Strategy sold 6,916 BTC before buying them back at a much higher price.
Between June 29 and 30, the company sold 1,363 bitcoins for $80.8 million. Its overall average acquisition price was then $75,578 per BTC.
Simply using that average, these bitcoins would have cost roughly $103 million. Sale proceeds: $80.8 million. Difference: around $22 million.
But Strategy’s initial quarterly filing reported only $900,000 in realized losses for the quarter as a whole.
Yet the two figures can be consistent from an accounting perspective.
Since the adoption of new US rules, the crypto assets covered by them are remeasured at fair value during each accounting period. Bitcoin rises? The gain goes directly into earnings. It falls? The same applies to the loss.
Historical purchase price is therefore no longer the immediate reference point at the time of sale.
The FASB rule changes how the figures are read
The change stems from the Financial Accounting Standards Board’s ASU 2023-08 standard.
The FASB now requires certain crypto assets to be recorded at fair value. Bitcoin and Ether are among those covered.
When a company sells its BTC, the “realized” loss shown in the income statement essentially measures the difference between the last price at which the bitcoins had already been remeasured and their sale price.
Not necessarily the difference between the sale price and what the company originally paid for them.
That is the trap.
Another example: Strategy sold 32 BTC at $77,135 in late May. Compared with its overall average cost of $75,699, the transaction appears to have generated a modest profit.
Except that Strategy later specified that the bitcoins actually involved had an acquisition cost of $125,464 each.
Same transaction. Same sale price. Completely different interpretation.
Not all crypto assets are treated the same way
The situation becomes even more complicated when several types of digital assets appear on the balance sheet.
The new rule applies in particular to fungible crypto assets that do not provide an enforceable right to an underlying asset. Bitcoin falls into this category. NFTs, however, are excluded. Many stablecoins may also fall outside the framework when they grant a redemption right against their issuer.
A company can therefore hold several crypto assets that are treated differently in the same accounts.
To truly understand a Bitcoin treasury company, quarterly net income is no longer enough. Investors need to examine the number of BTC, their acquisition cost, sales, the method used to identify the lots and fair-value changes. The model of crypto treasury companies already carries several risks beyond Bitcoin’s price alone.
The same distinction applies to investors: buying a Bitcoin ETF and buying a company with BTC exposure does not amount to buying the same thing.
ASU 2023-08 has brought crypto balance sheets closer to real market value. It has not made them easier to read.
À propos de l’auteur
Evan's Selemani
J’ai plongé dans Bitcoin dès 2017, bien avant qu’il ne devienne un sujet grand public. Depuis, j’ai transformé cette immersion de terrain en expertise concrète : analyse des cycles de marché, compréhension fine des protocoles, décryptage des narratifs et des enjeux réglementaires. Rédacteur crypto et formateur sur le terrain, je traduis la complexité de la blockchain en contenus clairs, précis et stratégiques, pensés autant pour les investisseurs avertis que pour les nouveaux entrants.
