While Bitcoin (BTC) advocate Michael Saylor frequently emphasizes that volatility is “a characteristic, not a flaw,” the negative side of this volatility is poised to become clearly apparent in the fourth-quarter financials.
Strategy, of which Saylor is the founder and chairman, may report a multi-billion dollar loss when it announces its fourth-quarter results.
The unrealized loss resulting from the decline in the market value of the company’s Bitcoin holdings, worth approximately $60 billion, represents a sharp turnaround from the $2.8 billion profit recorded in the previous quarter. According to Aaron Jacob, a professor at Brigham Young University and senior advisor at Taxbit, “There was a one-off jump in the previous quarter, but this quarter is different. There will be a pretty significant loss.”
Strategy changed its accounting policy in the first quarter of the year, beginning to account for crypto assets at market capitalization. This change, coinciding with Bitcoin’s nearly 24% drop in value in the fourth quarter, led to billions of dollars in losses becoming visible on the balance sheet.
This development comes at a critical time for Strategy, a company that transformed from a dot-com software firm into a leveraged Bitcoin company. While Saylor’s pioneering “corporate treasury model” initially yielded returns above indices, the company’s shares lost approximately 48% of their value by 2025.
The sharp drop in share price raised concerns that the company might have to sell Bitcoin to meet increasing obligations such as dividends and interest. These concerns were amplified by the fact that Bitcoin does not directly generate revenue and the software business has limited cash flow. To alleviate this pressure, Strategy sold shares on December 1st to build up cash reserves.
In its updated forecasts for 2025, released at the beginning of last month, the company assumed Bitcoin’s year-end price would be between $85,000 and $110,000. According to this scenario, operating income could range from a $7 billion loss to a $9.5 billion profit. Bitcoin closing the year down 6.5% at $87,648 suggests the actual outcome will be closer to the lower end of this range.
Saylor, who began adding Bitcoin to his balance sheet in 2020 as a hedge against inflation, is not alone in this wave. By early 2025, many publicly traded companies had begun accumulating digital assets, following in Strategy’s footsteps. Shares of companies like Tom Lee-backed BitMine Immersion Technologies initially rose sharply, then retreated with the downturn in the crypto market. These firms are also subject to the same fair value accounting rules.
According to Bruce Pounder, executive director of GAAP Lab, “Unrealized gains and losses are now accounted for concurrently with changes in market value. This is completely different from previous practices.”
The decline in Bitcoin and Strategy shares also affected Saylor’s personal wealth. According to Bloomberg Billionaires Index data, Saylor’s net worth is projected to decrease by approximately 40% to $3.8 billion in 2025.
On the other hand, Strategy’s institutional value (including debt and preferred shares) is approximately $61 billion, approaching the value of its Bitcoin assets. The possibility of this figure falling below Bitcoin’s holdings for the first time in over two years highlights the erosion of investor confidence.
While shares have fallen approximately 70% since their peak in November 2024, the company’s mNAV ratio (market capitalization to debt-to-Bitcoin assets) has dropped slightly above 1. This premium was one of the key arguments for Saylor’s Bitcoin buying strategy.
*This is not investment advice.
