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The Illusion of Profit: Why Strategy’s Bitcoin ‘Gains’ Cannot Be Realised

by Ram ben Ze'ev



The Illusion of Profit: Why Strategy’s Bitcoin ‘Gains’ Cannot Be Realised
The Illusion of Profit: Why Strategy’s Bitcoin ‘Gains’ Cannot Be Realised

There is a dangerous misunderstanding spreading among retail investors, and it centres on one word: profit.


In recent months, Strategy’s public filings and presentations have increasingly framed Bitcoin price movements in terms of operating income, net income, and earnings per share. To the untrained eye, this implies something intuitive and reassuring: that Strategy is generating profits when Bitcoin rises, and losses when it falls.


This implication is false.


Not misleading in a technical accounting sense, perhaps—but false in economic reality. And that distinction matters more than most investors realise.



Profit, in any meaningful sense, exists only when an asset is sold. Until that moment, all figures are hypothetical. They are quotes, not outcomes. They describe what might be achieved under conditions that may never exist, and in this case, conditions that cannot exist.


Strategy does not hold Bitcoin as a trading asset. It holds Bitcoin as a strategic reserve of unprecedented size. That single fact renders traditional notions of mark-to-market profit and loss deeply problematic.


The quoted Bitcoin price—$87,000, $100,000, $110,000—is the price for marginal transactions. It reflects what a small buyer or seller can execute without disturbing the market. It is not the price at which hundreds of thousands of Bitcoin can be liquidated.


To assume otherwise is to misunderstand how markets work.


If Strategy attempted to sell even a modest fraction of its holdings, the order books would be overwhelmed almost instantly. Liquidity would vanish. Price would gap lower. Each additional sale would depress the price further, ensuring that the next tranche sold would clear at a worse level than the last. This is not conjecture; it is basic market mechanics.


In such a scenario, the quoted price becomes irrelevant. The act of selling creates the collapse.


This is why the idea that Strategy could “realise” its reported profits is illusory. The profit exists only in a world where Strategy is not the seller. The moment it becomes one, that world disappears.



The same logic applies in reverse. When accounting statements show losses—whether $5 billion, $7 billion, or more—nothing has actually been lost unless Strategy is forced to sell. No Bitcoin has left the balance sheet. No cash has exited the business. The loss exists only because accounting rules demand that an unsellable position be priced as though it were instantly liquid.


This symmetry exposes the fiction on both sides of the ledger. The profits are not real. The losses are not real. What is real is the structure—and the risks it imposes on investors.


Retail investors, in particular, are vulnerable here. Many imagine that Strategy is a leveraged way to gain exposure to Bitcoin’s upside, complete with the added comfort of a corporate wrapper. What they are not told clearly enough is that the upside is constrained by illiquidity, while the downside is only avoided as long as no forced selling event occurs.


Strategy’s growing USD reserves make this tension explicit. Cash is not being hoarded out of optimism; it is being held to ensure survival during periods when accounting losses mount, interest costs accrue, and the company must avoid ever testing the market’s true depth. Cash is the firewall between paper volatility and catastrophic price discovery.


This leads to an uncomfortable truth: Strategy’s Bitcoin holdings function less like an investment portfolio and more like a monetary reserve. Central banks do not mark their gold reserves through profit and loss each quarter, nor do they pretend those reserves could be liquidated at the quoted spot price without consequence. They understand that reserves exist to anchor a balance sheet, not to be traded.



Yet retail investors are being encouraged—implicitly if not explicitly—to read Strategy’s financials as though these were ordinary gains and losses. They are not.


At $110,000 Bitcoin, Strategy could not realise anything close to its reported “profit.”


At $87,000 Bitcoin, Strategy has not lost anything unless it is forced to sell.


Both numbers are phantoms.


The real risk is not whether Bitcoin goes up or down next week. The real risk is whether Strategy ever faces circumstances—regulatory, financial, or structural—that compel it to sell into its own footprint. That is the moment when accounting fiction gives way to market reality, and when the price investors thought existed is replaced by the price the market can actually bear.


Retail investors deserve clarity, not comforting abstractions. They deserve to understand that what is being reported as profit is not spendable, not distributable, and not realisable without destroying the very market that sustains it.


Until a sale occurs, there is no profit.


And if a sale occurs, the profit vanishes.


That is the paradox at the heart of this strategy—and the danger of mistaking accounting language for economic truth.



>>>> BUY ME A COFFEE <<<<


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