MicroStrategy’s Crypto Assets: Will New US Accounting Rules Reverse Market Trends?

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According to the recent Bloomberg report, US accounting standards have greenlit new rules for valuing cryptocurrencies like Bitcoin and Ethereum. These accounting rules, slated for release by the end of 2023, will oblige companies with crypto holdings to report them at their current value, accounting for price fluctuations. While this could add volatility to earnings, it will offer a more precise snapshot of holdings.

However the rules will officially come into effect by 2025, but companies can opt for early adoption. Is there any notable gap in US accounting, which may benefit firms like MicroStrategy, Tesla, and Coinbase with substantial crypto assets? Amongst these Microstrategy got the max votes in the process. The question is the firm has faced accounting gaps in the past and Will this move save Microstrategy’s negative market trend? Let’s see. 

Will Microstrategy live up to the expectations? Analyst Questions

In recent years, MicroStrategy’s earnings have fallen 142.94%. The company had 123.09% earnings growth this year. Within five years, experts predict 2.10% profit growth for the company. Revenue growth last year was -2.25%. The cherry on the top is the latest update of the Financial Accounting Standards Board which has voted to allow companies like Microstrategy to report Bitcoin holdings at fair value.

Undoubtedly, this is a noteworthy move for institutional investors such as Blackrock, Fidelity, and Bitwise, who are actively seeking approval for their spot Bitcoin ETF applications.

What’s this New US Accounting Rules?

The FASB’s vote allows companies to measure crypto assets’ fair value including Bitcoin, based on new accounting rules. As per the new rules, companies will have to regularly check and report the changing values of their digital assets, like Bitcoin, in their financial statements. This way, if Bitcoin’s price goes up or down, their financial reports will show these changes, giving a clearer financial picture. These rules start in 2025 but can be used earlier. Only if they report it accurately will make sense to the entire process. 

Good, Yet Doubtful Deaton!

But according to XRP lawyer and pro crypto enthusiast John Deaton this is a refreshing step towards crypto assets. On the flip side, it is also important if these companies also play the crypto rules fairly. He remains cautious about whether non-crypto native companies, like MicroStrategy, will embrace mentioning crypto holdings on their balance sheets. This shift, along with a spot ETF approval, could significantly disrupt the financial domain.

Combined with many factors, this crypto at fair value is a breather for those who think spot Bitcoin ETFs would boost mainstream adoption of Bitcoin and ETH, but since the change is not until 2025, businesses like Microstrategy may take advantage of loopholes.