Despite Heavy Losses, Institutional Investors Maintains Conviction in Digital Asset Strategies.

The development in the crypto market in 2021 prompted several institutional investors to explore entering the digital assets industry. The majority wanted exposure to various assets and comparable services, while some placed indirect wagers on industry businesses. Additionally,

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Despite recent inactivity, MicroStrategy, Ark Invest, and Tesla have all established prominent digital assets-focused investment strategies and stayed involved in the sector. 

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In the fourth quarter, MicroStrategy reports an impairment charge of nearly $200M. In their original projections, experts anticipated MicroStrategy to generate a profit for the fourth quarter of 2022. Previously, the largest corporate Bitcoin holder broke its HODL strategy by selling 704 Bitcoin for $11.8 billion on December 22 to earn tax benefits. Nonetheless, the company gained 810 BTC just two days later, bringing its total Bitcoin growth from November 1 to December 24 to 3,205 Bitcoin. Ahead of its Q4 results, market analysts anticipated that the Saylor-led software business would report a profit for the first in two years despite a minor decline in revenue compared to the prior year. Specifically, FactSet's projections anticipated revenue of $130 million and a net income of $10.7 million.

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MicroStrategy disclosed its Q4 financial results for 2022 on February 2, disclosing an impairment charge of $197.6 million for its Bitcoin holdings. During this financial time, the main asset lost as much as 65% of its value. However, it has been rebounding this year, with a 31% increase on the year-to-date chart. It attributed the impairment charge to a net loss of $249.7 million, compared to a net loss of $90 million in the prior year's comparable quarter. The business intelligence company run by Saylor, one of the most consistent investor of Bitcoin since August 2020, earned $11.8 million in cash profits from its first-ever sale of Bitcoin. This fourth-quarter deal generated profits of $0.9 million.

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The company's total sales exceeded expectations, hitting $132.6 million compared to $134.5 million in the fourth quarter of the preceding year. MicroStrategy's chief financial officer, Andrew Kang, stated during an earnings call that the company would continue to acquire Bitcoin despite accumulated paper losses totaling $2.153 billion since the acquisition.

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Bitcoin remains king.

Kang stated that the business might investigate the prospect of other deals if BTC price volatility or other market movements match its acquisition strategy. MicroStrategy's performance measurements are computed based on a variety of benchmarks, including the performance of Bitcoin. The performance of MicroStrategy's stock has been comparable to that of Bitcoin, with similar gain/loss trajectories in their respective markets.

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At the end of Q4 2022, the corporation held 132,500 Bitcoin, a 1.9% rise over the previous quarter. Notably, it was not the first company to incur a write-down on its Bitcoin holdings.

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Tesla passed through the Fourth Quarter without selling any Bitcoin.

Less than a week after issuing its Q4 and FY earnings report on January 25, Tesla announced in a second Form 10-K filing on January 30 that it had lost $140 million by investing in Bitcoin. In February 2021, the EV manufacturer bought $1.5 billion in Bitcoin. However, since the cryptocurrency market saw a price decline, the automaker chose to sell 75% of its Bitcoin holdings in July 2021. Tesla stayed silent in Q4 as crypto markets were buffeted by significant headwinds. According to its results report, the automotive and energy giant neither bought nor sold further Bitcoin after selling the 75% of its Bitcoin holdings in the second quarter ($936 million on its books for a profit of $64 million).

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Elon Musk stated that the action was required to improve the company's liquidity situation owing to the unpredictability of COVID-19 lockdowns in China. Musk also says that the move was not a judgment on Bitcoin, but Tesla would be open to expanding its Bitcoin exposure in the future. In a recent filing with the SEC, Tesla disclosed a $204 million impairment loss due to Bitcoin's carrying value and a $64 million profit on Bitcoin traded for fiat currency. As part of conventional accounting processes, held assets are often subjected to periodic impairment tests to determine if their carrying value on the balance sheet exceeds their fair value. Last year, Tesla recorded an impairment loss of $101 million on digital assets and earnings of $128 million.

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The electric vehicle company highlighted that the impairment charges might alter the company's future Bitcoin investment strategy. Tesla disclosed that consistency with standard investment protocols and in accordance with established cash and cash-equivalent account management procedures retains the discretion to modify its digital asset portfolio at any time in response to changing business demands and an evaluation of current market conditions. The company's Q4 report stated its 9,720 Bitcoin holdings and other assets had a value of $184 million, down 15.6% from $218 million in the quarter before as a result of the fall in the spot price.

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By the end of the year, the value of the top digital asset token decreased from just under $20,000 at the end of the third quarter to around $16,500. FactSet stated that Tesla's adjusted earnings per share (EPS) of $1.19 exceeded the consensus forecast of $1.13. However, the California-based manufacturer posted sales of $24.3 billion for the quarter, falling short of the projected $24.7 billion.

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Meta is not withdrawing despite metaverse's economic losses of $13.7 billion last year.

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Mark Zuckerberg's social media platform, formerly Facebook, was renamed Meta in 2021 to explore metaverse ventures. In 2022, the corporation recorded a loss of $13.7 billion as a result of its incursion into the virtual world. The yearly sales of Reality Labs, Meta's virtual reality and augmented reality business, decreased from $2.27 billion in 2021 to $2.16 billion in 2022. Despite this decline in performance, the tech giant has no plans to alter its existing strategy, which aims to capitalize on the long-term potential it sees in this industry. Susan Li, the company's chief financial officer, stated that Meta expected this division's full-year losses to increase as the company continued to invest in its metaverse business.

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Microsoft, a competitor in the technology industry, halted its Industrial Metaverse initiative, which had been launched in October. In addition to discontinuing the endeavor to establish corporate software interfaces that might be used to drive metaverse-related initiatives, the tech company also laid off the about 100-member team involved.

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PayPal suspends its stablecoin project.

Trade Algo reported that global financial services firm PayPal had paused its stablecoin project due to a New York Department of Financial Services investigation into Paxos, its crypto partner. Alongside Thursday's update on the NYDFS investigation into the Pax dollar and Binance USD stablecoin issuer, PayPal stated that it is dedicated to launching its 1:1 dollar-pegged stablecoin offering, pending approval from appropriate regulators.

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In its annual report filed with the SEC this week, the global payments giant disclosed a huge crypto holding of $604 million for clients through its hold-and-sell crypto service launching in October 2020 for US users. The sum represented 67% of its overall financial obligations at the end of the year, with derivatives accounting for an additional $298 million. Bitcoin accounted for $291 million of the liabilities, with Ethereum's native token, Ether accounting for $250 million. PayPal has endured the difficulty of the gloomy macroeconomic environment, announcing a 7% personnel cut impacting 2,000 people. Additionally, PayPal CEO Dan Schulman just announced his departure from the business he has led since 2015 at the end of the year, adding to the number of CEOs exiting the industry in other industries.

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Ark Invest acquires additional Coinbase shares.

Ark Invest added 162,325 Coinbase shares and 263,504 Robinhood shares worth around $9.267 million and $2.63 million, respectively, to its portfolio. The purchase is the most recent instance of an apparent "buy the drop" trend that the digital assets investment asset has adopted so far this year. In July 2017, Ark sold roughly 1,400,000 Coinbase shares across all of its funds, including the flagship Ark Innovation ETF. Additionally, the organization sold nearly $500,000 worth of Robinhood shares. The company's CEO, Cathie Wood, has independently predicted that Bitcoin's price will hit $1 million by 2030.

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As the market responded to news that the US markets regulator had fined Kraken exchange $30 million and restricted its crypto staking service for US consumers, Coinbase shares fell on Friday. As interest in the artificial intelligence (AI) industry grows, the company's decision to boost its COIN holding demonstrates a desire for crypto-focused assets. Individual and institutional investors have poured vast sums of money into the latter category because they perceive it as the next disruptive and important phenomenon. A poll conducted by JPMorgan in January indicated a change in focus from blockchain to artificial intelligence, whose crypto market experienced a steep decline in 2017.

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Changing focus to AI and critiquing conventional finance

Michael Demissie, the head of digital assets at BNY Mellon, stated at a conference organized by Afore Consulting on February 8 that digital assets continue to be of interest to institutions. Demissie also mentioned the "buy and hold" strategy employed by this group of investors, citing a poll conducted by a major US bank in October. However, the banking executive bemoaned the absence of clear and appropriate legislation as an impediment to the use of these digital assets. Despite the bad events roiling the industry, BNY Mellon is not the only bank interested in digital assets.

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Charlie Munger of Berkshire Hathaway is the most recent skeptical Wall Street elite to dismiss Bitcoin and crypto. The billionaire investor attacked Bitcoin as a 'gambling contract' and called for its prohibition by federal authorities. Michael Saylor, the former CEO of MicroStrategy, linked Munger's proposal for a federal ban on crypto to his lack of knowledge of digital assets.

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"If Munger were a business leader in South America, Africa, or Asia who spent 100 hours researching the problem, he would be more positive on bitcoin than I am, MicroStrategy's executive chairman stated in a Trade Algo interview following the publication of the company's fourth-quarter profits.

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Warren Buffett, Munger's investing partner, shares similar unfavorable views on Bitcoin. Buffett has been similarly dismissive of the disruptive technology behind cryptocurrencies.

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