All crazy for profits in Bitcoin: analysis of Tesla, Microstrategy and the Holders Army’s capital gains

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In this article, we take an in-depth look at capital gains related to investments in Bitcoin, more specifically regarding the holdings of Tesla, Microstrategy and cryptocurrency hodlers in general.

Elon Musk’s company recently revealed its quarterly earnings report for Q3 2023, highlighting that no bitcoins held have been sold in recent months.

Microstrategy has finally returned to profit after the cryptocurrency’s latest rally that broke out following the news about BlackRock’s spot ETF.

Instead, most hodlers of the cryptocurrency asset are returning to capital gains, especially after the latest leg up towards $35,000. 

Those who bought higher than the current value may decide to liquidate some of their loss-making positions shortly in order to deduct their capital losses in the run-up to December.

Let us analyse the situation for these 3 different realities together.

Investing in bitcoin and capital gains: Tesla and Microstrategy earnings analysis

When we talk about corporate investments in Bitcoin and capital gains, we cannot fail to mention the company that has created a strong narrative around this topic, especially in 2021, by being on the lips of all digital asset enthusiasts.

We are talking about Tesla, the well-known car manufacturer in the hands of multi-billionaire Elon Musk, which in February 2021 attracted the attention of the whole world by buying the insane amount of 42,902 BTC at an average price of around $35,000 per cryptocurrency, for a total value of $1.5 billion.

The Austin, Texas-based company made strong (unrealised) capital gains on bitcoin throughout 2021, only to see all those gains evaporate when the cryptocurrency itself went through a tough bear market phase in 2022.

In July last year, Tesla made the delicate decision to liquidate 75% of its holdings in BTC for a total value of $936 million, a shortfall of $140 million from the original purchase price.

At present, according to the quarterly earnings report published in October, the electric vehicle manufacturer still holds 9,720 bitcoins, or $331 million.

Taking into account that a small part of the original BTC stake was liquidated in tranches between 2021 and 2023, we can calculate that Tesla has no significant capital gains or losses at the moment, being more or less at par with its investment.

It did not sell any holdings last quarter and may decide to hold on to its remaining satoshi until the crypto returns to its all-time highs to finally realise a significant capital gain.

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Source: https://www.sec.gov/Archives/edgar/data/1318605/000162828023034847/tsla-20230930.htm

Turning now to Microstrategy, a US business intelligence firm that holds the record as the largest holder of bitcoins in the public company sector, with a calculated haul of 158,245 BTC or around $5.4 billion.

Michael Saylor, CEO of the well-known company in Tysons Corner, Virginia, has always followed his DCA buying plan by averaging his carrying price since 14 September 2020, the day he began applying the principles of the Bitcoin philosophy.

Through both bull and bear markets, Microstrategy has continued to buy bitcoins and can now boast of having acquired a significant number of coins at an average price of $29,870.

There was also a time when Saylor and his firm lost more than $1 billion and came under pressure from the media and cryptocurrency critics who accused them of poor risk management for going virtually all-in on a highly speculative asset.

However, following Bitcoin’s recent rally on news of BlackRock’s IShares spot ETF, Microstrategy has returned to profitability and currently reports a capital gain of $688 million.

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Cryptocurrency holders and the amount of coins currently in profit compared to purchase price

In order to track the behaviour and results of the wider audience of bitcoin stakeholders, it is interesting to take a look at Glassnode’s latest report, which focuses on the topic of capital gains/losses for cryptocurrency holders.

Following bitcoin’s recent rally on rumours of the imminent approval of BlackRock’s IShares spot ETF, we can see that the majority of the cryptocurrency’s supply in circulation is in profit compared to the last reference price at which trades were made on the blockchain.

Specifically, at $35,000 BTC, approximately 81% of the supply in circulation would be in profit.

If we go down to $25,000, the situation does not change too much, as 57% of the supply in circulation would still be profitable.

From this figure we can deduce that 4.7 million BTCs (24% of the supply) were last traded above $25,000 (and below $35,000) and could be sold for panic selling in the event of a sharp drop below this threshold.

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Although the flow of around ¼ of all bitcoins currently in circulation depends on the fate of short-term price movements, we can still see that long-term holders are more confident than ever in the currency’s future.

According to on-chain data provider Glassnode, we can see that 14.899 million BTC, or around 76% of the supply in circulation, have not moved their coins in over a year.

This figure is at its ATH: never before have so many users held their coins for a year without moving them.

This means that more and more people are interested in accumulating bitcoins without looking at today’s capital gains, rather than focusing on short-term price movements.

At current prices (as of 24 October), just under 30% of all bitcoin ‘long-term holders’ are at a loss.

The remaining 46%, while making a profit, prefer to look to the future and hope that the cryptocurrency will reach higher prices in the coming years.

However, of the latter group, which includes the massive 6.85 million BTC, it should be noted that a large portion is no longer traded on the chain because it has been lost forever.

In fact, it is estimated that over 3 million bitcoins are now irretrievably lost due to the loss of their private keys by those who obtained them at the beginning of their existence.

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