Strategy Posts $4.1 Billion Tax Benefit as Bitcoin Crosses Above Its Cost Basis
Bitcoin rise lifts Strategy past its cost basis
Strategy announced an estimated $4.1 billion income-tax benefit after the price of Bitcoin rose above the company's average purchase price as of September 30. The filing was submitted on October 5.
The benefit comes from reversing a deferred tax asset tied to its Bitcoin holdings and releasing a valuation allowance. Strategy holds 848,000 BTC at an average cost of $75,440.70 per coin, including fees and expenses, as of October 4 at 4 p.m. Eastern time.
The company's management-prepared figures have not been audited or reviewed by KPMG.
Key numbers to watch
- $4.1 billion — estimated income-tax benefit for Strategy
- 848,000 BTC — Strategy's disclosed holdings as of October 4
- $75,440.70 — Strategy's average purchase price per BTC
- $81,188 — estimated average cost of Bitcoin held inside BlackRock's iShares Bitcoin Trust (IBIT), per Maketo data as of October 2
- ~806,038 BTC — BlackRock's IBIT holdings as of October 5
- $89.8 million — net outflows across US spot Bitcoin ETFs on October 5
What the SEC filing shows
In its October 5 filing, Strategy reported that Bitcoin's fair value exceeded its cost basis at the end of September. The company reversed a deferred tax asset and released the related valuation allowance, lowering its estimated tax expense. Strategy said these figures are management estimates and have not been audited or reviewed by KPMG.
The company also disclosed a separate cutoff for its holdings: 848,000 BTC at an average cost of $75,440.70 as of October 4, a date after the September 30 accounting comparison used for the tax benefit.
BlackRock ETF cost basis sits above current levels
Data from Maketo estimates the average cost of Bitcoin underlying BlackRock's iShares Bitcoin Trust ETF (IBIT) at $81,188 per BTC as of October 2. An ETF is a fund that tracks an asset and trades like a stock on regular exchanges.
On October 5, BlackRock's IBIT held about 806,038 BTC. The fund reported nearly $69 billion in net assets and a Bitcoin benchmark level of $85,694.41 that day.
A June 30 quarterly filing tells a different story for the same period. It recorded 734,261 BTC in the trust with an investment cost of about $61 billion and a fair value of about $43.4 billion — placing those holdings well below cost at that cutoff date.
During the six months ended June 30, the trust acquired 157,501 BTC and disposed of 192,970 BTC for share redemptions. Those disposals include in-kind transfers.
Shareholder break-evens differ from fund costs
IBIT shareholders buy and sell shares on the open market at whatever price the market sets on a given day. That means each investor's personal break-even price depends on when they entered, even though every share represents a claim on the same pool of Bitcoin held by the fund.
The fund's own acquisition cost and an individual investor's entry price are two separate measures.
How redemption choices shape market impact
When an investor sells IBIT shares on the secondary market, it does not directly move Bitcoin. Only authorized participants can redeem baskets directly with the trust.
IBIT offers two redemption paths. In a cash redemption, the trust sells underlying Bitcoin for cash and passes the cash to the redeemer. In an in-kind redemption, the trust delivers Bitcoin itself to the recipient.
The question of whether cost-basis crossings influence selling behavior remains open. US spot Bitcoin ETFs recorded net outflows of $89.8 million on October 5, while Farside Investors data showed BlackRock's fund recorded inflows on the same session, suggesting different flow directions across funds on the same day.
Establishing whether crossing cost basis changes redemption timing requires comparing flows and prices over a longer window, not a single trading day.
Why the cost-basis crossing matters
Strategy's filing illustrates one practical effect of Bitcoin moving above a large holder's cost basis: a material tax-accounting benefit. The company no longer carries the same deferred tax asset or valuation allowance against its Bitcoin holdings, which lowers its estimated tax expense.
The same crossing creates a separate question for ETF investors and the trust itself. Whether reduced cost-basis pressure leads to fewer or different redemptions cannot be determined from the data available so far.
What to watch next
The next signals are the actual creation and redemption activity for Bitcoin ETFs, and how redeemed Bitcoin is handled — whether it stays held, is sold, or moves to other wallets. Daily flow data will help clarify whether cost-basis crossings are affecting investor behavior.
Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.
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