Cointime

Download App
iOS & Android

Michael Saylor Registered $1.3 Billion in Bitcoin Losses, You’ll See Why It’s a Brilliant Move

He’s no stranger to controversy.

In 1999 the SEC brought accounting charges to Saylor’s company MicroStrategy, which had to pay $350,00 in penalties.

As a result of republishing the correct financial figures, the company’s stock plummeted in value, and Saylor’s net worth fell by $6 billion.

In 2022 things got worse.

The Attorney General for the District of Columbia is suing Saylor for alleged tax fraud. They’re accusing him of illegally avoiding $25 million in taxes by pretending he lived in another state.

The volatility of Bitcoin and the recent correction present tax loopholes for everyday people, but the billionaires whose companies are cleverly still buying more Bitcoin are taking advantage of the loophole the most.

Let’s not single out wealthy people. Cryptocurrency wash selling, tax harvesting or whatever the heck you want to call it is an entirely legitimate practice in the United States for anyone to do.

Saylor is a Bitcoin maximalist who believes no other cryptocurrency or digital asset besides Bitcoin has any meaningful value.

He has yet to stop buying Bitcoin and owns about 132,500 purchased for $3.98 billion, averaging $30,639 per coin.

But he’s also secretly selling his Bitcoin, and despite media headlines around the sale of his Bitcoin, you’ll see why it’s a brilliant move.

Tax Loss Harvesting.

It sounds dirty, but Tax Loss Harvesting is a legitimate practice in the U.S. If you live in other parts of the world, it may be different. So you should check with a tax professional.

None of this is financial advice.

Tax-loss harvesting generally works by selling an underperforming investment which is losing money. Then, you use that loss to reduce your taxable capital gains.

According to an SEC filing, Michael Saylor’s MicroStrategy bought 2,395 Bitcoin for $42.8 million in cash between November 1 and December 21, 2022.

Then the day after, on December 22nd, they sold 704 Bitcoin at a loss to offset previous capital gains.

A few days later, on December 24th, Microstrategy bought 810 Bitcoin.

It’s the first time Saylor’s company has sold Bitcoin since it began adding it to its treasury in 2020.

Saylor was transparent that the purchases and sales of Bitcoin were to generate a net tax benefit, and losses involved were to offset previous capital gains, per the filing.

“MicroStrategy plans to carry back the capital losses resulting from this transaction against previous capital gains, to the extent such carrybacks are available under the federal income tax laws currently in effect, which may generate a tax benefit.”

Michael Saylor bought back more Bitcoin than he sold at the higher price of $16,845 per coin on the 810 Bitcoin, costing him $69 extra per coin because the sale of the 704 Bitcoin averaged $16,776

MicroStrategy bought 2,395 Bitcoin between November 1 and December 21, 2022, before venturing into the tax-loss harvesting strategy.

The purchase cost about $42.8 million, resulting in an average price of $17,871 per bitcoin, including fees.

Michael Saylor now holds 132,500 BTC, acquired for about $4.03 billion at an average price of $30,397 per Bitcoin and faces an unrealised loss of over $1.3 billion.

MicroStrategy’s SEC filing is transparent and states the sole purpose of the sale is that they intended to generate a tax benefit.

Michael Saylor, in a recent interview, doubled down on the fact that he believes in the virtues of Bitcoin more than any other asset, and even though the losses to the market may seem a surprise to everyone, it’s tied to digital asset impairment losses and the way Bitcoin is accounted for because it is unregulated.

He responded when questioned on whether this was a sign he was changing his strategy to Bitcoin.

Interviewer — “You did report a loss that surprised everyone, but it’s tied to impairment losses, connected to how Bitcoin losses are accounted for. Please walk me through your paper losses of 1.3 billion dollars. Does this change your strategy around Bitcoin and future BTC acquisition?”

Michael Salor — Source

“No, it doesn’t change our strategy, the losses are a function of the indefinite intangible accounting treatment, and of course, an encouraging development in the industry is that companies are going to move to fair value accounting, so eventually, we’ll be able to mark our Bitcoin assets to market, so we’re enthusiastic about that.

Micro strategy is a way to invest in the digital transformation of money.

We’re a gateway to the macro and crypto economy, allowing investors to go short or long. Or trade the volatility.

So our strategy is to buy and hold Bitcoin, and the key for us to be consistent, transparent and responsible in pursuing that strategy, and we’re unique in that regard.”

The interviewer then asked Saylor if he planned on selling Bitcoin in the future because there were sales for tax loss harvesting in December 2022.

Michael Saylor — Source

“We’re always considering ways we can take advantage of this multi-billion dollar asset, and as you know, there is volatility and some unique tax treatment.

In that case, we were able to generate a 34 million dollar tax loss, and we were able to carry it back against taxable gains.

We look forward and may see opportunities from time to time, but we’re fairly prudent, responsible and considerate in covering those things.”

Unlike stocks or bonds, cryptocurrencies escape one rule that applies solely to financial securities — the “wash sale” rule.

Suppose you want to sell a stock at a loss and buy the same or substantially identical stock or security within 30 calendar days before or after the sale. You won’t be able to take a loss on your current-year tax return like Saylor did with his Bitcoin.

Since cryptocurrency is largely unregulated, it isn’t a security, so the 30 days wash sale rule does not apply.

Final Thoughts.

If you’re an investor in MicroStrategy, you’d be happy with how Michael Saylor has managed the Billion Dollar asset you’ve invested in, provided you’re satisfied with him buying Bitcoin until the cows come home.

Michael Saylor is an unusual off-centre character who idolises Bitcoin and shares his views of the Digital currency religiously on the internet.

Most of the time, he divides opinions.

Although well within the current law, there is a moral aspect to him booking in losses and buying back those assets the next day to avoid paying tax.

The moral aspect is for you to decide.

I get a lot of stick when I say this, but Michael Saylor is a genius to me. He’s the named inventor on more than 40 patents and has navigated his technology company through multiple recessions and setbacks over the last 30 years.

You don’t get there by accident, which shows how he manages his investor’s Bitcoin holdings.

Brilliantly.

Comments

All Comments

Recommended for you

  • U.S. consumer confidence improves again in November, reaching a two-year high

    Dana M. Peterson, Chief Economist of the World Large Enterprises Federation, said, "US consumer confidence continued to improve in November, reaching the highest level in the past two years. The growth in November was mainly due to consumers' more positive assessment of the current situation, especially in the labor market. Compared with October, consumers' optimism about future employment opportunities has also greatly increased, reaching the highest level in nearly three years. At the same time, consumers' expectations for future business conditions have not changed, while their optimism about future income has slightly declined." Earlier, the US Conference Board Consumer Confidence Index for November recorded 111.7, a new high since July 2023.

  • Starknet: Phase 1 of STRK staking is now live on the mainnet

    Starknet announced that the first stage of STRK staking has officially launched on the mainnet.

  • CZ: Not trying to end the meme craze, just encouraging more builders

    CZ posted on X platform today, saying: "I am not against Meme coins, but Meme coins have become 'a little' strange now. Let's use blockchain technology to build practical applications." Some community users said that even Musk is a supporter of Meme coins, and it is very difficult to end this frenzy. CZ responded that "there is no attempt to end anything, everyone has the right to choose to invest or hold what they want. Just encourage more builders."

  • Talus Network Completes $6 Million Strategic Round of Financing with a Valuation of $150 Million

    decentralized AI protocol Talus Network raised $6 million in a strategic financing round led by Polychain Capital, valuing the company at $150 million. This funding will help further develop the Talus ecosystem, including the Protochain, Nexus framework, and "AI dating experience" application.

  • AXIOS: Trump is considering appointing a secretary of state for artificial intelligence

    according to AXIOS, Trump is considering appointing an AI minister to coordinate federal policies and government use of emerging technologies.

  • Coinbase International has launched COW perpetual contracts

     Coinbase International has launched COW perpetual contracts. COW-PERP market limit, market, stop loss, and stop loss limit orders are now all available.

  • Schuman Financial Completes $7.36 Million Seed Round, Led by RockawayX

    Schuman Financial has completed a $7.36 million seed round of financing, led by RockawayX, with participation from Lightspeed Faction, Kraken Ventures, Nexo Ventures, Gnosis VC, Delta Blockchain Fund and Bankless Ventures. In addition, Schuman Financial has launched a euro stablecoin, EURØP, which complies with the MiCA standard.

  • QCP: BTC's path to $100,000 has stalled, and ETH implied volatility has turned to put options

    QCP Capital has published an analysis indicating that the recent drop in the price of Bitcoin has resulted in long liquidations exceeding $430 million. This drop coincides with the end of five consecutive days of net inflows for spot ETFs, which recorded a outflow of $438 million on Monday, while MicroStrategy fell by 4.4%. With the US holiday approaching and no immediate catalyst to push prices higher, BTC's path towards $100,000 has stalled. In addition, the implied volatility of ETH has turned to bearish options rather than bullish options, and market concerns about downside risks may intensify, especially with the release of the FOMC meeting minutes and PCE data. However, in the long run, this market decline is not an excessive correction. Bitcoin has only retreated to last week's level. Since Trump's election, the market has become extremely overbought and leveraged, so a pause is inevitable.

  • Binance will delist GFT, IRIS, KEY, OAX, and REN

     Binance will delist the following trading pairs on December 10, 2024: GFT/USDT, IRIS/BTC, IRIS/USDT, KEY/USDT, OAX/BTC, OAX/USDT, REN/BTC, and REN/USDT. Additionally, Binance Futures will close all positions and automatically settle the KEYUSDT and RENUSDT USDⓈ-M perpetual contracts on December 3, 2024 at 09:00 (UTC). After the settlement is completed, the contracts will be delisted.