Greetings, advisors!
between “realized” numbers inside quarterly digital asset earnings and what is truly occurring on the balance sheet. Should you rely upon quarterly income statements to evaluate treasury actions, you may be examining the incorrect figure.
Next, under “Ask an Expert,” Kim Klemballa walks us through Strategy Inc. — the biggest corporate owner of bitcoin globally — and explains the mechanics of their treasury-as-a-business approach.
Enjoy the reading.
Crypto earnings reports use the wrong ‘realized’ figure
When Strategy previewed its second quarter through a July 6 filing, it advised shareholders to anticipate an $8.32 billion impairment on digital holdings: $8.31 billion of it unrealized, alongside $900,000 realized. When the results were published on July 30, the accompanying press release characterized the entire $8.32 billion sum as an unrealized loss. The realized amount vanished due to a rounding convention between the successive filings.
That represents a minor detail, and therein lies the entire problem.
Strategy parted with 1,363 bitcoin across June 29 and 30 for $80.8 million, averaging $59,256 per token. Evaluated against the $75,578 blended acquisition cost the firm reported as of June 30, that amount of coins cost approximately $103 million to procure. This yields a variance of roughly $22 million on a single transaction. Nonetheless, the realized deficit reported for the entire quarter sat at $900,000. Both calculations are defensible, yet they measure completely different things, and only one aligns with what accounting rules define as ‘realized.’
ASU 2023-08 mandates that eligible crypto assets must be held at fair value, with adjustments channeled through net income. Because the asset gets marked up right up to the sale date, the gap between the final valuation and the sales proceeds is typically minimal or occasionally zero — reflecting merely the price movement since the last assessment rather than the true economics of the position. The Financial Accounting Standards Board (FASB) foresaw this outcome. Within the Basis for Conclusions, the Board highlighted that certain practitioners treat that difference as a realized gain or loss, stating clearly that it fails to reflect the total realized gain or loss from a disposal, which is properly measured as the variance between the selling price and the cost basis of the asset. That cost-basis figure is precisely what the accounting standard requires firms to disclose on an annual basis.
Consequently, the metric circulating in quarterly earnings media coverage and the metric featured in annual footnotes represent distinct measures carrying identical labels. Nothing improper is taking place here — cost-basis reporting is an annual obligation, whereas quarterly updates reflect income statement impacts. However, any reader treating the quarterly figure as an accurate indicator of actual treasury disposal actions is looking at the wrong data point, and the gap separating the two extends well beyond mere rounding.
FASB merely demands that corporations state their chosen cost method: first-in-first-out (FIFO), specific identification, average cost, or alternative methods. The aforementioned $22 million figure presumes a blended average. A business applying FIFO to holdings gathered since 2020, back when bitcoin traded in the five-figure range, would match those exact coins against a significantly lower basis, meaning that identical sale at the same price could generate a realized gain.
Strategy disposed of 32 coins between May 26 and May 31 at an average price of $77,135 — surpassing the $75,699 blended average disclosed for its portfolio at the time. Under an average cost approach, that transaction registers as a realized gain of approximately $46,000. During the second-quarter earnings call, executives revealed the cost basis specific to those particular units: $125,464 each, representing roughly $4 million in basis against $2.5 million in proceeds. Far from a gain.
Thirty-two coins. One price point. A realized outcome falling on either side of zero depending entirely on which specific coins management claims were sold — an accounting election unveiled once a year inside a footnote.
Under fair value accounting, every single unit is already adjusted to market value. The chosen cost method now serves solely to fulfill a disclosure requirement and nothing more, which explains why it attracts minimal scrutiny.
A fair counterargument is that if the cost methodology exerts no influence on earnings, the income statement metric is the transparent one while the footnote remains a historical artifact. Still, the cost-basis calculation answers the fundamental question people actually care about: did the asset sell for more or less than its acquisition cost?
This consideration carries greater weight during market downturns than during bull runs, and the second quarter marked the third consecutive quarterly decline for digital assets — representing the longest negative streak since the 2022 bear market, with the CoinDesk 20 dropping 17.9% and bitcoin settling at $58,544. Realized losses tend to be interpreted as capitulation, whereas realized gains suggest discipline. Neither interpretation holds up upon examining the footnote.
An underlying complication also exists: claiming “Crypto operates on fair value now” is a simplification, and an overly broad one at that. The accounting standard applies to an asset only if it satisfies every inclusion criterion: it must be intangible, fungible, maintained on a distributed ledger, cryptographically secured, devoid of any enforceable claims against external parties, and not issued by the reporting entity or associated affiliates. Bitcoin and ether meet these criteria. NFTs fail the fungibility test — the Board purposely excluded them. Fiat-backed stablecoins typically grant redemption rights against the issuer and thus fail due to enforceable claims. Wrapped tokens depend on the specific rights conferred by their wrapper. Anything failing these tests reverts to the traditional model of cost less impairment, persisting on the same balance sheet alongside assets adjusted to market values every quarter.
Therefore, two elements are worth extracting from annual reports this season rather than earnings announcements: the cost accounting method, including any policy modifications, and the cumulative realized gains or losses derived from the rollforward rather than the income statement line item.
ASU 2023-08 rendered crypto balance sheets more transparent than ever before. Simultaneously, it left the term “realized” assigned to two different values, placing the more informative one where fewer observers look.
– Kriti Bansal, vice president of finance and accounting, AlphaPoint
Ask an Expert
What is Strategy?
Strategy Inc. (NASDAQ: MSTR) functions as a publicly listed U.S. enterprise serving as the preeminent corporate holder of bitcoin globally. It established itself as the pioneering and most prominent Digital Asset Treasury (DAT). Originally known as MicroStrategy, the company officially rebranded to “Strategy” early in 2025.
What is the firm’s history?
MSTR was established in 1989 by MIT graduates Michael Saylor and Sanju Bansal. At the zenith of the dot-com bubble in 2000, MSTR’s valuation skyrocketed toward $50 billion prior to experiencing a 99% collapse. Between 2001 and 2020, MicroStrategy operated as a slowly expanding enterprise software vendor. Its market capitalization remained range-bound between $1 billion and $2 billion. In August 2020, Michael Saylor converted the entirety of the enterprise’s cash reserves into bitcoin BTC$81,422.98. What began as a defensive treasury hedge rapidly transformed into the company’s central corporate identity. As of late August 2026, Strategy commands an impressive 845,050 BTC — representing roughly 4% of the entire supply of bitcoin that will ever be mined.
How does the business model work?
Strategy continues to develop and market artificial intelligence-powered enterprise analytics software. This operation generates consistent annual revenues in the hundreds of millions (approximately $477 million). Rather than channeling software profits into digital assets, MSTR issues corporate debt and distributes new tranches of common stock to institutional investors. MSTR immediately deploys the raised capital to acquire spot bitcoin.
Rather than holding spot bitcoin directly, numerous institutional investors choose to purchase MSTR shares instead. This sustained demand frequently drives the stock’s valuation above the intrinsic market value of the underlying bitcoin reserves. MSTR leverages this valuation premium to continuously issue shares, acquire additional bitcoin, and elevate its “bitcoin per share” performance indicator.
– Kim Klemballa, head of marketing, CoinDesk Data & Indices
Keep Reading
Twenty-one major international financial institutions, including Bank of America, Citi, Goldman Sachs, Deutsche Bank, and UBS, have agreed to establish a collaborative stablecoin entity, aiming to launch a USD-pegged stablecoin during the first half of 2027.
The U.S. Securities and Exchange Commission has introduced proposals to update transfer agent regulations, formally acknowledging blockchain as a valid ledger for securities transactions, while opening a 60-day public comment window.
G20 member states are preparing to institute novel regulations governing crypto and stablecoins.
Seeking further insights? Access up-to-the-minute cryptocurrency reporting via coindesk.com alongside institutional market metrics at coindesk.com/institutions.
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Originally published at https://www.coindesk.com/coindesk-indices/2026/09/03/crypto-for-advisors-why-crypto-earnings-reports-can-be-misleading.
