MicroStrategy Q1 net loss hits $53.1M but Bitcoin buying spree continues

April 29, 2024 Coin Telegraph

Ernst & Young taps ZK-proofs on Ethereum to automate contracts

April 18, 2024 Coin Telegraph

FASB rules ‘eliminate the poor optics’ that shied firms from crypto: Analyst

September 7, 2023 Coin Telegraph

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“The change should help MicroStrategy and other companies that hold digital assets to eliminate the poor optics that have been created by impairment losses,” said analysts from Berenberg Capital.

The United States Financial Accounting Standards Board’s new rules for crypto accounting will eliminate the “poor optics” that plagued companies holding digital assets, according to analysts from Berenberg Capital.

On Sept. 6, the U.S. Financial Accounting Standards Board (FASB) approved new rules for cryptocurrencies with regard to how companies report the fair value of their holdings on their balance sheets.

In a follow-up analyst note from Berenberg’s senior equity research analyst Mark Palmer, the analyst argued the changes would be particularly beneficial for companies such as Microstrategy, who will soon be able to report their digital asset holdings each quarter without having to realize impairment losses.

“The change should help MicroStrategy and other companies that hold digital assets to eliminate the poor optics that have been created by impairment losses under the rules that the FASB has had in place,” it wrote.

Since it started accumulating Bitcoin in August 2020, MicroStrategy has racked up $2.23 billion in cumulative impairment losses.

Moreover, some of the quarterly reports the company has released during the past three years have included sizeable impairment losses on its BTC holdings that reflected downward moves in the asset’s price.

*MicroStrategy impairment losses. Source: Berenberg Capital*

This led to negative news coverage of the firm and its reports, “giving the impression that the company’s inherent value had been negatively impacted when such was not the case,” said Palmer.

Under the new rules, which will go into effect in 2025, firms that hold crypto will be able to report those holdings at fair value. Therefore, their quarterly reports will reflect the current values of the assets, including any price rebounds.

Currently, impairment losses must be included and cannot be adjusted even if the asset price recovers.

MicroStrategy is the world’s largest corporate holder of BTC with 152,800 coins as of July 31, currently valued at around $3.9 billion. The new rules can be applied in advance and Berenberg believes MicroStrategy will do so which will value its BTC holdings at $8.8 billion by April 2024.

According to Berenberg's note, MicroStrategy CEO Michael Saylor oncesaid that the primary reason more firms have not adopted a BTC investment strategy is because of the FASB's "hostile" and "punitive" treatment of crypto. He continued to state that the change is a positive outcome:

“A change in the accounting treatment would be a significant positive catalyst for the price of Bitcoin, as it would spur adoption by tech companies.”

Magazine: How to protect your crypto in a volatile market: Bitcoin OGs and experts weigh in

7,800 jobs at IBM could be replaced by AI within years, suggests CEO

May 2, 2023 Coin Telegraph

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Arvind Krishna, the chief executive of IBM, said roughly 30% of their non-customer-facing positions could be covered by artificial intelligence over a five-year period.

International Business Machines Corp. (IBM) is expecting to put a “pause” on hiring for "back-office" roles that could be potentially automated by artificial intelligence (AI) instead.

IBM CEO Arvind Krishna explained in a May 1 interview with Bloomberg that many “back-office” positions such as those in the human resources and accounting departments will likely be the first to be automated by AI.

The IBM boss added he could "easily" see 30% of these positions replaced by AI over a five-year period.

Dropbox: Laying off 500 people and replacing them with AI

IBM: Pausing hiring for ~7,800 roles that could be done by AI

AI is already replacing jobs
— Genevieve Roch-Decter, CFA (@GRDecter) May 1, 2023

IBM employs 282,000 employees globally according to LinkedIn and according to Bloomberg has around 26,000 non-customer-facing staff — meaning around 7,800 jobs could be handed over to AI.

“I could easily see 30% of that getting replaced by AI and automation over a five-year period.”

According to some reports, AI-based automation has already helped IBM save well over $1 billion in business expenses and maintenance costs.

Among the tasks that may be automated include providing employment verification letters or moving employees between departments.

However, Krishna thinks human resource roles that evaluate workforce composition, measure productivity and other tasks that benefit from human judgement likely won’t be replaced over the next decade.

For AI to work, it must be built responsibly. IBM CEO Arvind Krishna shares how organizations can prepare for the challenges and opportunities ahead in @FortuneMagazine: https://t.co/WYBu6VUCuc pic.twitter.com/gZtLwTNklb
— IBM (@IBM) April 24, 2023

Many industry pundits remain at crossroads on whether AI actually has the potential to leave humans without work on a mass scale.

A recent study found that 62% of Americans think implementing artificial intelligence in the workplace will have a “major impact” on workers within the next 20 years, leaving many employees “wary” and “worried” about what their future holds.

The more tech-savvy employees however feel slightly more secure about their future.

Blockchain developer Salman Arshad recently explained to Cointelegraph that instead of AI coming in to wipe out the developer market, it’ll only serve as a tool to increase efficiency.

“You know what your company wants to do. You can tell ChatGPT, and it can perfectly transform your commands into a smart contract, auditing process, document or white paper.”

“ChatGPT and AI tools are a blessing; they are not our enemies and are not here to end the career of a developer,” he added.

Another blockchain developer, Syed Ghazanfer, explained to Cointelegraph that the combination of human input and ChatGPT offers much more versatility than a complete transition to AI automation.

On the other hand, Dominik Schiener, the founder of the IOTA Foundation, believes that AI will take away employment opportunities from humans but at the same time, AI and robotic process will create new jobs:

“We’ll see more and more humans being forced to pivot to new roles that may look nothing like anything they’ve ever done.”

Magazine: NFT Creator, Emily Xie: Creating ‘organic’ generative art from robotic algorithms

FTX Finds $7.3 Billion in Liquid Assets; Lawyers Consider Rebooting Shuttered Crypto Exchange

April 13, 2023 Bitcoin.com

Lawyers’ picnic: FTX counsel and advisers rake in $34M in January

March 8, 2023 Coin Telegraph

Lawyers’ picnic: FTX counsel and advisers rake in M in January

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Millions have been invoiced from a host of law firms, investment bankers, consultants and financial advisers in FTX’s bankruptcy case.

The law firms, investment banks and consulting companies working with FTX on its bankruptcy case billed the crypto exchange a combined $34.18 million in January, court documents reveal.

FTX’s chief restructuring officer and new CEO, John J. Ray III, also received a hefty pay package, charging $1,300 an hour to a total of $305,000 in February according to a March 6 filing.

*Fee breakdown of FTX CEO John J. Ray III over the month of February. Source:* *Kroll*

Separate court filings on March 6 show United States law firms Sullivan & Cromwell, Quinn Emmanuel Urquhart & Sullivan and Landis Rath & Cobb invoiced $16.9 million, $1.44 million and $684,000, respectively, for their services and expenses in January.

Lawyers and staff of Sullivan & Cromwell billed a total of 14,569 hours for their work, which equates to over 600 days. Some partners received up to $2,165 per hour, while the firm’s paralegals and legal analysts were being billed out at $425 to $595 per hour.

The highest-priced billables were discovery ($3.5 million), asset disposition ($2.2 million) and general investigation work ($2 million).

*Sullivan & Cromwell’s fee statement as counsel to FTX Trading for the month of January. Source:* *Kroll*

It submitted another hefty $7.5 million bill to FTX for the first 19 days of February.

Ray played a crucial role in keeping Sullivan & Cromwell on board as legal counsel, having filed a court motion on Jan. 17 arguing that the white-shoe law firm had been integral in taking control over the “dumpster fire” that was handed to him.

His filing came in response to an objection to the retention of the law firm on Jan. 14 by U.S. Trustee Andrew Vara, who claimed that Sullivan & Cromwell had failed to sufficiently disclose its connections and prior work for FTX.

FTX special counsel Landis Rath & Cobb spent much of its working hours attending court hearings and litigation procedures. For its efforts, the firm billed the FTX administrators $684,000, including expenses.

Between the three law firms, over 180 lawyers and over 50 non-lawyer staff worked on the case, most of who came from Sullivan & Cromwell.

Forensics consulting firm AlixPartners billed $2.1 million for January. Almost half of the firm’s hours were spent on forensic analysis of decentralized finance products and tokens in FTX’s possession.

Consulting firm Alvarez & Marsal invoiced for $12.5 million for over 17,100 hours it committed to avoidance actions, financial analysis and accounting procedures.

*A breakdown of Alvarez & Marsal’s monthly fee statement by project, hours and fees for the month of January: Source:* *Kroll*

Investment bank Perella Weinberg Partners billed a monthly service fee of $450,000 plus more than $50,000 in expenses for planning a restructuring strategy and engaging in correspondence with third parties.

With FTX’s trial set for October, there are at least another six months of legal work to do for the law firms involved. Recent reports have estimated that the fees could reach in the hundreds of millions by the time the case is over, which could potentially rival the $440 million in fees that New York-based law firm Weil Gotshal made from the infamous Lehman Brothers bankruptcy in 2008.

Marathon Digital bungles crypto impairment sums, will reissue financials

March 1, 2023 Coin Telegraph

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The Bitcoin miner received a letter from the Securities and Exchange Commission highlighting accounting mistakes it made on multiple financial disclosures.

Bitcoin (BTC) miner Marathon Digital will reissue a number of previous financial statements after the United States Securities and Exchange Commission pointed out some accounting errors the firm made.

According to a Feb. 27 SEC filing, Marathon will restate its unaudited Q1, Q2, and Q3 quarterly reports from both 2021 and 2022 in addition to its audited annual report from 2021.

Marathon noted that affected financial statements, related earnings releases and other financial communications during these periods “should not be relied upon.”

The issues highlighted by the SEC on Feb. 22 were Marathon’s method for calculating impairment on digital assets, as well as Marathon’s determination that it had acted as an agent while operating a Bitcoin mining pool rather than a principal.

A principal is an entity that has the legal authority for decisions, while an agent is an entity that can only act on behalf of a principal.

Marathon noted that by changing the determination of its role in operating the pool from an agent to a principal, revenues and cost of revenues will see minor increases but does not believe the change will impact its bottom line.

“The restatement of the Impacted Financial Statements is not expected to have any impact on total margin, operating income or net income in 2021 or in any of the interim periods in 2021 or 2022.”

As a result of the accounting issues, Marathon postponed its fourth-quarter 2022 earnings call, which was set to take place on Feb. 28, and will postpone the publication of its corresponding financial results.

Today, we announced that we are cancelling our webcast and conference call for Q4 & FY 2022, initially scheduled for today at 4:30 p.m. ET, and are postponing the publication of our corresponding financial results. For more, please see this press release: https://t.co/UAryIr56aC
— Marathon Digital Holdings (NASDAQ: MARA) (@MarathonDH) February 28, 2023

Marathon intends to file its results for 2022 by March 16. It has notified the SEC it would take up to 15 days to make the necessary corrections to the report, which was previously due by March 1.

The miner announced on Feb. 2 that it had sold 1,500 BTC throughout January, marking the first time it had sold Bitcoin since Oct. 1, 2020, as it looks to build up a “war chest” of both cash and Bitcoin and ensure it can be flexible throughout 2023.

While 2022 proved to be a tough year for Bitcoin miners — leading to the capitulation of firms such as Core Scientific in December — an increasing BTC price and stable electricity prices have helped the industry rebound strongly so far in 2023, with production and hash rates generally up across the board.

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USDC transfer volume hit 5X USDT’s in fallout from FTX collapse

January 11, 2023 Coin Telegraph

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Although it has a much smaller market cap, on-chain data shows that USDC has a much greater transfer volume compared to its main competitor USDT.

Stablecoin USD Coin (USDC) has grown in popularity since the collapse of FTX and now frequently reaches daily transfer volumes four to five times that recorded by major competitor Tether (USDT) according to data from blockchain analytics firm Glassnode.

That’s despite the market cap of USDT being $23 billion greater than USDC. As of Jan. 10, the difference was in USDC’s favor by a margin of four and a half times.

Both stablecoins recorded surges in transfer volumes following an infamous tweet from Binance CEO Changpeng Zhao on Nov. 6 announcing Binance would liquidate its entire FTX Token (FTT) holdings. FTX went into bankruptcy soon after.

Since then, USDC has been the preferred choice for crypto users averaging over $12.5 billion more in transfer volume compared to USDT per day according to Glassnode data.

*Total transfer volumes for USDC (In blue) and USDT (In green) from Oct. 8 to Jan. 10. Source: Glassnode.*

While each of the stablecoins is designed to trade as close to one U.S. dollar as possible and is backed by reserves held by its issuers, USDC is regarded by some in the crypto community as a potentially safer option.

Supporters point to USDC’s assets, which are backed by cash or short-term U.S. treasuries and its monthly audits by global accounting firm Grant Thornton.

Tether has faced criticism over a number of years for not providing a proper audit and for being less transparent about its reserves.

The company behind USDT was fined $41 million in Oct. 2021 by the Commodity Futures Trading Commission, which accused it of only holding sufficient reserves 27.6% of the time between 2016 and 2018 despite claiming its tokens were fully backed by fiat currencies.

Tether has been reducing the commercial paper backing its issued tokens in favor of safer alternatives, with the latest asset breakdown on Nov. 10 showing that nearly $46 billion of its reserves consist of cash, bank deposits and U.S. treasuries.

USDT briefly lost its peg to the U.S. dollar following the FTX collapse amid fears it was exposed to Alameda Research and FTX, which Tether denied.

On-chain evidence suggests the two firms were attempting to short the stablecoin.

USDT had been recording transfer volumes much higher than USDCs up until May 2021, after Tether had increased the supply of the token from $8.79 billion to $61.82 billion over the last year, representing an increase of 603%.

*Market cap of USDT from May 2018 to Jan. 2022. Source: TradingView*

Despite the subsequent change in consumer preferences, Tether had referred to the growth in market capitalization as an indication of “the market’s continued trust and confidence in Tether,” and noted every token can be redeemed for U.S. dollars on a 1:1 basis.

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