A publicly traded bitcoin whale has an obvious (paper) loss.

An enterprise software company that invested $4 billion in bitcoin will share publicly on Tuesday how much damage the crypto bear market has done to its balance sheet.

Why it matters: MicroStrategy is a bitcoin whale, holding the most of any public company. So bitcoin enthusiasts big and small will be very interested in what co-founder and CEO Michael Saylor has to say when the company reports its second quarter earnings.

• Saylor is something of a Bitcoin influencer and is credited with popularizing keeping bitcoin on the company’s balance sheet.

Quick take: Many will argue about the company’s bitcoin venture, and how it has gone wrong. (MicroStrategy has paid an average of $30,664 per bitcoin, far more than where prices are now.)

• In the meantime, the company will account for its stock of 129,699 bitcoins at its lowest price in that time period, which exacerbates the pain on paper.
• The price of the world’s largest digital asset fell roughly 60% from peak to trough in the months of April to June.

Yes, but: The drag on earnings is a balancing exercise in imaginary pain, because these losses are theoretical until the company changes its buy-and-hold strategy.

What they say: “Honestly, it doesn’t matter. It has no impact on the intrinsic value of the company,” Mark Palmer, research analyst at BTIG, told Axios.

• What many pros care about is how the company will continue to buy the digital asset.

The big picture: MicroStrategy’s stock price has become closely tied to the price of bitcoin, so unless bitcoin prices rise, the company will have to figure out a way to continue funding its buy-and-hold strategy, Palmer said.

Context: MicroStrategy has reached for every financial lever available to the public company to fund the buy-and-hold bitcoin strategy it announced in August 2020.

The other side: However, Jefferies analyst Brent Thill recently downgraded MicroStrategy’s stock to an “underperform” from a previous hold rating, saying the company was sitting on a “$1 billion unrealized loss.”

Of the note: Now that the market and the crypto community have turned negative together, analysts and traders are watching to see if MicroStrategy will sell its shares at very low prices to continue buying bitcoin related to a billion-dollar shelf registration it set for June 2021.

What’s next: MicroStrategy’s conference call is expected on August 2 at 5 p.m. ET.

The bottom line: MicroStrategy’s stock is an imperfect play on bitcoin much like the world’s largest bitcoin fund Grayscale Bitcoin Trust.