Strategy estimated a $4.1 billion income-tax benefit after Bitcoin's fair value rose above its cost basis as of September 30, according to its October 5 filing. The benefit stems from a lower estimated tax expense through an accounting adjustment.
The company reversed a deferred tax asset related to its Bitcoin holdings and released the associated valuation allowance. Strategy disclosed holding 848,000 BTC at an average purchase price of $75,440.70, including fees and expenses, as of October 4 at 4 p.m. Eastern time.
ETF Cost Basis and Shareholder Break-Even Points Differ
The cost basis crossing has distinct implications across different investment vehicles. BlackRock's iShares Bitcoin Trust ETF (IBIT) held approximately 806,038 BTC as of October 5, according to the fund's holdings file. The fund reported nearly $69 billion in net assets and a Bitcoin benchmark level of $85,694.41 that day.
An IBIT shareholder's break-even price depends on when they purchased their shares at market prices, even though all shares represent interests in the same pool of Bitcoin. The fund's estimated acquisition cost measures a different position from each shareholder's individual investment.
IBIT's June 30 quarterly filing recorded 734,261 BTC with an investment cost of about $61 billion and a fair value of about $43.4 billion. During the six months ended June 30, the Trust acquired 157,501 BTC and disposed of 192,970 BTC for share redemptions, including in-kind transfers.
Multiple Paths for Bitcoin Movement and Flows
Investors can exit IBIT positions through secondary market share sales or redemptions with authorized participants. The fund's prospectus distinguishes between cash redemptions, in which the Trust converts Bitcoin into cash, and in-kind redemptions, which deliver Bitcoin directly.
US spot Bitcoin ETFs recorded net outflows of $89.8 million on October 5, while BlackRock's fund recorded inflows during the same session, reflecting different flow directions across funds on that day.
The cost-basis crossing creates material tax-accounting consequences, as demonstrated by Strategy's filing. Actual creations, redemptions, and the handling of redeemed Bitcoin represent the next signals for potential market impact.
