Why crypto earnings reports can mislead investors on realized gains and losses

Quarterly earnings reports for companies holding crypto assets like bitcoin may not clearly show the true gains or losses from selling those assets, according to a new analysis. The issue stems from accounting rules that use two different measures both called “realized.”

Strategy Inc., the world’s largest corporate holder of bitcoin, reported an $8.32 billion loss on digital assets in its second quarter. The company initially broke this down as $8.31 billion unrealized and $900,000 realized. But in its final report, the entire $8.32 billion was labeled as unrealized, with the realized figure omitted due to rounding.

This discrepancy highlights a broader problem: the “realized” loss or gain in quarterly reports often reflects only the difference between the last marked value and the sale price, not the full economic impact of the transaction. The true realized gain or loss—the difference between the sale price and the original purchase price—is disclosed annually, not quarterly.

How accounting rules create confusion

Under accounting standard ASU 2023-08, crypto assets like bitcoin must be recorded at fair value, with changes reflected in net income. This means the asset’s value is updated regularly, so the difference between the last marked value and the sale price is often small. However, this figure does not represent the total gain or loss from the original purchase.

The Financial Accounting Standards Board (FASB) has clarified that the “realized” gain or loss in quarterly reports is not the same as the total realized gain or loss from selling the asset. The latter is calculated using the asset’s cost basis, which companies disclose only once a year.

For example, Strategy sold 1,363 bitcoin in late June for $80.8 million, at an average price of $59,256 per coin. Based on the company’s blended purchase price of $75,578, the sale resulted in a loss of about $22 million. Yet, the reported realized loss for the quarter was just $900,000. Both numbers are technically correct under the accounting rules, but they measure different things.

Why the cost basis matters

The cost basis—the original price paid for an asset—determines whether a sale results in a true gain or loss. Companies can use different methods to calculate this, such as first-in-first-out (FIFO), specific identification, or average cost. The choice of method can significantly affect the reported outcome.

In May, Strategy sold 32 bitcoin at an average price of $77,135. Using the company’s blended average cost, this sale appeared to be a small gain. However, the actual cost basis for those coins was $125,464 each, meaning the sale resulted in a loss of about $1.5 million. This discrepancy arises because the cost method is disclosed only annually, while quarterly reports use the fair value adjustment.

Not all crypto assets are treated the same

The accounting standard ASU 2023-08 applies only to crypto assets that meet specific criteria: they must be intangible, fungible, reside on a distributed ledger (a type of database spread across multiple computers), and be cryptographically secured. Bitcoin and ether qualify, but assets like NFTs (non-fungible tokens, which are unique digital items) and fiat-backed stablecoins (digital currencies pegged to traditional money like the US dollar) do not. These excluded assets revert to the older cost-less-impairment model.

What investors should look for

To understand a company’s true performance with crypto assets, investors should focus on two details in annual filings: the cost method used and the cumulative realized gains and losses from the rollforward table. Quarterly earnings reports may not provide the full picture due to the accounting rules in place.

What is Strategy Inc.?

Strategy Inc., formerly known as MicroStrategy, is a publicly traded U.S. company and the world’s largest corporate holder of bitcoin. Founded in 1989, the company originally focused on enterprise software but shifted its primary business model to holding bitcoin in 2020. As of late August 2026, Strategy holds 845,050 bitcoin, roughly 4% of the total supply.

The company funds its bitcoin purchases by issuing corporate debt and selling new shares of stock. This approach allows it to continuously acquire more bitcoin, even as its share price often trades at a premium to the value of the bitcoin it holds.

Sources

• CoinDesk