Bitcoin giant Strategy takes loss to stave off likely tax hit—and keeps buying Bitcoin

Bitcoin investment company Strategy, formerly MicroStrategy, reported its fourth consecutive quarterly loss in an attempt to avoid a potential multibillion-dollar tax hit.

The company said Wednesday it had a fourth-quarter net loss of Bitcoin holdings. The charge reflects the total dollar amount the company’s Bitcoin holdings decreased throughout the quarter, as a result of Bitcoin’s volatile price fluctuations.

Strategy said its revenue fell 3% to $120.7 million.

“Digital asset impairment charges in Q4 were approximately $1 billion,” Strategy CFO Andrew Kang, said on the earnings call with shareholders. “I am happy to announce that Q4 will be the last quarter where we will recognize an impairment charge on our Bitcoin holdings as we move to fair value accounting in Q1.”

The company’s stock fell nearly 4% on Thursday, to $323.

The impairment charge is the result of an old accounting rule that required a company to report a quarterly decrease in value for its digital asset holdings but prohibited it from recording any increase in value during the same period.

The rule was changed in 2023 and took effect in late 2024, benefiting companies like Tesla , which was able to report a $600 million boost in profits by reporting the fair value of its Bitcoin holdings last quarter. However, Strategy has chosen to hold off on taking advantage of the new rule until Q1 of 2025, because reporting those unrealized gains—increases in the value of an asset that has not yet been sold—would result in a massive taxable event.

As part of the Inflation Reduction Act of 2022, the corporate alternative minimum tax was introduced, forcing companies to pay a 15% tax on adjusted financial statement income. For Strategy, which plans to report the cumulative net increase of its Bitcoin holdings in Q1 plus $12.7 billion worth of retained earnings, this could equate to a multibillion-dollar tax.

However, Strategy may be able to avoid the tax altogether. The company’s cofounder and executive chairman, Michael Saylor, said on Wednesday’s earnings call that he is working with the Internal Revenue Service and pro-crypto lawmakers to get an exemption from this tax rule, as other companies like Berkshire Hathaway already have.

“We don’t think that there’s any broad-based support for the idea of an unrealized capital gains tax on crypto assets for large corporate holders, so we don’t expect over time that this will come to much,” he said.

Either way, Saylor said, the company plans to keep adding to its Bitcoin stockpile—which currently stands at more than 471,100 coins or over 2% of the total 21 million supply. The company will continue to issue shares and “innovative fixed-income securities” to raise enough capital to buy more Bitcoin and reach his target of generating $10 billion worth of gains this year, he said.