Bitcoin treasury firm Strategy, formerly MicroStrategy, has expressed concerns about potential profitability risks due to Bitcoin price volatility and changing tax rules. In its latest filing with the SEC, the company highlighted liquidity concerns, new fair-value accounting rules, and the possibility of significant tax bills. Strategy reported a net loss for 2024, mainly attributed to a digital asset impairment. It stated that returning to profitability could be challenging, especially if Bitcoin prices decline, as it may impact the firm's liquidity and force it to sell Bitcoin at unfavorable prices. The company's enterprise analytics software business also did not generate positive cash flow in 2024, potentially necessitating equity or debt financing. The firm's financial obligations are heavily reliant on the value of its Bitcoin holdings, so a significant decrease in Bitcoin's market value could pose financing difficulties and increase liquidity risks. Strategy will start using fair-value accounting rules from January 2025, recognizing unrealized Bitcoin gains and losses in net income, which could lead to increased earnings volatility. The company also faces tax challenges, particularly related to unrealized Bitcoin gains and the Corporate Alternative Minimum Tax. Despite these concerns, Strategy's stock price has seen a significant increase in the past year. It currently holds over 2.2% of Bitcoin's total supply and has outstanding debt of $7.27 billion.



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