The market capitalization seems to have had the dominant propulsion of stock prices, especially for companies that have a significant possession of bitcoin last year. Companies such as MicroStrategy (MSTR) and Tesla (TSLA) have moved in parallel with the rise in bitcoin.
This tendency is amplified by a widespread risk -on sentiment of stocks, which often exceeds basic profits. Investors have regarded these companies as proxy coin investments and evaluated the amount of bitcoin owners, rather than the conventional financial indicators such as profit, profitability, or profit per share (EPS).
However, this approach had a clear limit based on the previous accounting rules. Bitcoin was treated as an indefinite intangible asset under the generally accepted accounting principle (GAAP), so public companies were able to recognize the loss only if the price of bitcoin declined. It was forbidden to recognize profits until it was sold.
As a result, a company holding the bitcoin was distorted and seemed to be financially vulnerable during the decline in the price, and did not receive accounting benefits during the Bull execution. As a result, revenue reports often do not reflect the true economic value of bitcoin in corporate balance sheet.
In December 2023, the Financial Accounting Standards Committee (FASB) introduced a new rule (ASU 2023-08) that fundamentally changed bitcoin and other digital assets.
In the new framework, bitcoin is measured by fair value for each report period, and unreasonable interests and losses are recognized by net income. This will delete the asymmetrical treatment of ciphers under the previous accounting standards, and will be able to report the rise in bitcoin as a revenue, rather than waiting for sales to occur.
This change directly affects the way investors evaluate these companies, as their revenue numbers reflect the real -time performance of bitcoin. This also means that the fluctuations in bitcoin -led revenue are part of the basic stock analysis.
If you have a large -scale bitcoin owner, a quarterly profit report is much more important in the market volatility era. As a result, Bitcoin Wording Companies have announced the fourth quarter earnings earlier this week, and Bitcoin Holding Companies can create a new trading pattern that experiences stock prices about the announcement of revenue. Masu.
ASU 2023-08 major corrections
In the new rules, companies need to measure bitcoin and other digital assets in the scope for each report period, and changes in value are immediately recognized by net income. This is a severe departure from a previous accounting model, where bitcoin was classified as an indefinite intangible asset.
In the previous accounting model, companies needed to recognize impairment loss only if the value of assets decreased, unless bitcoin was sold, if the value of assets decreased.
This asymmetric treatment has created a distortion in financial reports, and often led to modest income in the bullish market and exaggerated in the bear market. By switching to fair value accounting, companies are currently reporting the actual market value of Bitcoin and adjusting financial statements more closely with economic reality.
New standards are also required by companies to provide bitcoin and cryptocation holding separately from other intangible assets on a balance sheet. In addition, the interests and losses from the re -measurement of fair value must be clearly reported to the profit and loss statement, not in other asset adjustments.
This means that investors are explicitly explicit and look at individual line items, eliminate ambiguity, and analyze the fluctuations of revenue linked directly to the price of bitcoin. By separating cryptocation -related revenue from other business activities, analysts can model corporate core operation performance more accurately compared to the impact of Bitcoin price volatility.
Impact on public companies that own BTC
New fair value accounting processing provides more accurate financial status to companies that have bitcoin, but profits reports are far more unpredictable and unstable.
A very plastic example of how this volatility affects companies, you can look at Microstrategy. As of January 27, the company has a 471,107 BTC, and is evaluated as about $ 49 billion, given that the market price of bitcoin is $ 104,275 at the time of press.
This means that if the price of Bitcoin rises to $ 109,489 in a very conservative 5 % quarter, about $ 2.45 billion will be added to the fair value held. If the price increase by 10 % rises to $ 114,702, the revenue will increase by $ 4.9 billion, but if it decreases by 10 % to $ 93,847, $ 4.9 billion will be eliminated from net income.
This level of volatility in the reported revenue position is a micro strategy as a high beta vehicle for the exposure of bitcoin. This is because modest price fluctuations can lead to billions of dollars in the quarterly performance.
This allows other important companies of Microstrategy and BTC Holdings to play a high beta version. In the financial market, beta plays refer to assets or shares that among wider market movements, and shows higher volatility compared to basic markets or assets. In the case of MicroStrategy, etc., the shares function as a leverage process of bitcoin, and profits and ratings are very sensitive to bitcoin price fluctuations.
The open company in the United States, which holds more than 1,000 BTC entity, is a 21m Microstratezi MSTR: NADQ 49,490,836,207 2.243 % MARATHON DIGITAL HOLDINGS MARA $ 4,247,86,515 0.193 % Platforms, 313,536 0.08 % Cleanspark Inc CLSK: NASDAQ 10,097 $ 1,060, 712, 265 0.048 % Ital Holdings BRPHF: OTCMKTS 8,100 $ 850, 922,982 0.039 % SEMLER Scientific SMLR: NASDAQ 2,321 $ 243,826,202 0.011 % CIPHER MINING CIFR: NASDAQ 2,142 $ 225,021,855 0.01 % EXODUS MOVEMENT in DOD
However, this increase in revenue volatility has a potential drawback, especially for the CAMT of the company. The CAMT, established under the 2022 inflation reduction law, imposes a minimum tax of 15 % of the adjusted financial statements (AFSI) of large companies. In particular, AFSI contains unreasonable profits from assets such as bitcoin.
As a result, companies such as microstratezies may face considerable tax liabilities based on these unexpected interests, even without actual asset sales. The Ministry of Finance has provided exemptions for unrealized benefits for certain assets, but at present no bitcoin and other cryptocurrencies are included in these exemptions.
In order to exempt undifferential interests related to bitcoin from CAMT, Congress, or the Ministry of Finance, a new law to clarify that digital assets should not be included in the AFSI calculation, or issue guidance. You need it. There are several possible ways to achieve this, but the easiest, probably one is to issue a new regulation guidance to interpret how to apply CAMT. The Ministry of Finance can determine that the profits of the unreasonable bitcoin should not be included in the AFSI. This is the same as that the unrealized interests of ordinary shares have already been excluded.
Fair value accounting fixes the main distortions of companies to report bitcoin, but opens the door to unintended results. Currently, due to unreasonable profits, companies may face a large tax bill for profits that are not actually recognized. Unless the regulatory authorities intervene, the existence of bitcoin in the balance sheet of the company may become a double -edged sword.
With a new FASB rule posting, Bitcoin Holdings first appeared in Cryptoslate.
