Meitu Declares $43 Million Impairment Loss Over Crypto Holdings

Meitu, a Chinese AI-driven tech company primarily focused on smartphone and selfie app manufacturing has declared a $43 million impairment loss on its cryptocurrency holdings. According to reports, this impairment loss has more than doubled over the last quarter. Meitu’s loss is a reflection of the downtrend that crypto prices have suffered over the past year.

The last cryptocurrency bull run is famous for the influx of public companies and institutional investors. This new category of participants was popular for purchasing cryptocurrencies, especially BTC and ETH in large volumes. The adoption level that was engineered by this set of investors was seen as a significant force that pushed many crypto prices to their all-time highs.

In 2021, when the bull run was nearing its peak, many public companies flooded the industry, one of which was Meitu. The Chinese beauty app company, at the time, reported having purchased about 940 BTC, and 31,000 ETH. At the time, these cryptocurrencies were reported by Meitu to have been purchased for $49.5 million and $50.5 million respectively, summing up to a net crypto investment of about $100 million.

A recent report claims that Meitu’s impairment loss on the established cryptocurrency investment currently stands at over 300 million yuan ($43.4 million), equivalent to almost half of the entire value of the original investment. By impairment loss, it means a loss in the value of an asset when it falls below the carrying value of the investment. As it stands, there are existing fears within the company that this loss in its crypto holdings could reflect significantly on the net loss of the company by the end of the first half of the year.

Crypto prices achieved all-time highs in the middle of 2021, with the flagship cryptocurrency, Bitcoin reaching as high as over $64,000. As mentioned above, part of the surge in price was occasioned by the influx of public companies like Meitu and other institutional investors.

Shortly after reaching such highs, crypto prices began to drop across the board. The drop in prices coincided with a regulatory clampdown from China which led to several crypto practitioners, especially cryptocurrency miners closing shop or moving to new destinations. Ever since the market has remained in a bearish situation with investors either cutting their losses or waiting for a turnaround.

Unlike in the early days of Bitcoin when it served as an alternative to the mainstream stocks and equities market, nowadays both the cryptocurrency market and the mainstream markets appear to be moving in a synchronized pattern. Several analysts have attributed this new development to the participation of institutional investors whose activities are weighing on the cryptocurrency market at a significant level. For them, cryptocurrencies only form parts of their portfolios and are subject to a uniform investment decision based on their sentiments.

Fans of the independent and decentralized cryptocurrency market have criticized this development, with some of them suggesting that it is a deliberate effort by the establishment to exert their control over a supposedly democratized financial ecosystem. In their argument, the consequence of this development is exemplified in the current situation where the cryptocurrency market appears to be struggling with the global mainstream economy, rather than acting as a hedge for investors.

The losses by cryptocurrency holders cut across the board, as Meitu is not the only company to report massive losses based on their holdings. Meitu’s loss is relatively small when compared to what was reported by the flagship company for institutional investors, Microstrategy. During the same period, Microstrategy reported a loss of over $900 million in its BTC holdings.

Other companies that joined the massive adoption of Bitcoin during the last bull run include Tesla, Galaxy Digital, Voyager Digital, Marathon Digital Holdings, and many others. All these companies have recorded losses at different levels, with some of them liquidating all or part of their holdings in the bear market. As of the time of writing, Bitcoin was trading at about $20,000, representing less than a third of its value at the peak of the bull run.