A Hong Kong-based software company called Meitu bought 940 BTC and 31,000 ETH in March and April this year, investing about $ 100 million in total in the cryptocurrency industry .
By the end of the second quarter, the value of both cryptocurrencies dropped significantly, which is why, according to preliminary calculations, the value of Meitu’s BTC investments dropped to $ 30.9 million. According to experts, the company will soon have to publish accurate information about its financial losses.
As a reminder, Meitu became one of the public companies that invested in cryptocurrency. As noted, she purchased 940 bitcoins for $ 49.5 million. Today they are valued at $ 30.9 million, which means the company, in theory, lost $ 18.6 million in BTC.
This makes it eleventh in the overall ranking of public companies with investments in BTC. Here is a table of holders of the first cryptocurrency.
That being said, Meitu is one of two public companies that have acquired ETH. Its initial investment of $ 50.5 million at current exchange rates is estimated at more than $ 65 million. This means that the growth of Ethereum practically compensates for the company’s losses from the collapse of Bitcoin.
Regardless of what is happening, Meitu’s management has no plans to get rid of their cryptocurrency holdings.
How to lose money on Bitcoin
In accordance with the rules governing intangible assets such as Bitcoin and Ethereum, if their value decreases since the date of purchase, the company must report this as a loss in its financial statements. In general, the rules governing the ownership of intangible assets have an interesting feature. If, in theory, Meitu’s bitcoins increased in value since they were acquired, it would still remain an intangible asset, so the company would not be able to register the price increase as its own profit.
The only way to profit from intangible assets is to sell them. And right now, Meitu is not going to get rid of its cryptocurrency. Here is a quote from company representatives, in which they share their attitude towards their own investment. The cue is from Decrypt.
Since the acquisition of the assets, the company has not bought or sold cryptocurrencies in accordance with its digital asset investment plan. There are currently no plans to sell them in the near future.
Accordingly, the company’s management decided to switch to the so-called hodl – that is, to hold the cryptocurrency, despite the behavior of its course. From this we can conclude that the giant plans to play for a long time and is able to wait out the rate drawdown lasting several months.
However, everything is not so bad. As we already noted, Meitu «earned» $ 15.39 million from her investment in Ethereum, although this amount still remains on paper. Well, according to tradition, it will be possible to fix the profit only after the sale of coins.
Speaking of the real application of cryptocurrencies. Argentine congressman Jose Luis Ramon yesterday proposed to approve a bill that would allow local businesses to pay their employees in a crypt. Here is his remark on this matter.
Argentines can strengthen their autonomy and maintain the purchasing power of their wages.
Ramon’s proposal contains several key details. First, employees will have every right to decide whether to accept cryptocurrency at all as a form of payment. The employer will also have to bear the costs of transferring cryptocurrencies to the employee. According to the document, payment can be made in two ways: either by payment in the national currency of Argentina, the peso, which is equivalent to a payment in cryptocurrency, or simply by direct payment in a crypt.
The congressman backed up his proposal with a common argument from proponents of digital assets: payments in cryptocurrency are supposedly protection against inflation. In Argentina, the inflation rate in May was 3.3 percent , and for the year this figure increased up to 21.5 percent . In such a situation, the crypt, which is growing in value for a long time, could indeed become a good means of remuneration for labor.
However, this only works in theory. As mentioned above, over the past months, the crypto market has sank heavily, and if the Argentines at that time were receiving wages in the crypt, their situation would be noticeably worse than with the same payment in pesos. The congressman’s proposal can be viewed as positive news for the industry itself, but such a strategy is unlikely to be unambiguously beneficial for the country. At least if we consider it in the context of the current subsidence. And at the stage of growth, citizens would indeed become noticeably richer.
We believe that the decision of Meitu’s management not to get rid of the cryptocurrency may turn out to be the right one. Judging by what is happening in the market, the bears were unable to drop Bitcoin below 30 thousand dollars for a long time. Taking this into account, we can assume that in the future we will have another stage of growth. In any case, investors should consider the negative option, using risk mitigation tools.