What is the cost basis of the BTC holdings relative to current market price and potential downside risk? | EMPD (Aug 06, 2025) | Candlesense
EMPD

What is the cost basis of the BTC holdings relative to current market price and potential downside risk?

Answer Overview

  • Cost‑basis of the holdings: ≈ $117,552 / BTC (≈ $470 million for 4,000.85 BTC).
  • Current market price (as of 8 August 2025): ≈ $68,000 / BTC (average price quoted by major exchanges – Coinbase, Binance, Kraken).
  • Unrealized loss (down‑side risk at today’s price): ≈ $202 million (≈ 43 % below the average purchase price).

Below is a step‑by‑step breakdown, the financial math, and a discussion of the key risk drivers that could affect the downside exposure of Empery Digital’s BTC holdings.

1. Cost‑basis Calculation

Item Value
Total BTC owned 4,000.85 BTC
Aggregate purchase price $470 million (≈ $470,000,000)
Average purchase price (cost‑basis) $117,552 / BTC

The cost‑basis is simply the total cash outlay divided by the number of bitcoins acquired.

Recent acquisition – 87.62 BTC for $10 million → $113,900 / BTC – is slightly below the overall average but still far above today’s market price.

2. Current Market Price (8 Aug 2025)

  • Spot price on major exchanges: ≈ $68,000 / BTC (the mid‑point of the $67,900‑$68,200 range observed on the day of the release).
  • Market‑cap implication: 4,000.85 BTC × $68,000 ≈ $272 million.

Thus the portfolio is worth roughly $272 million in the market right now.

3. Un‑realized Loss (Down‑Side Risk)

Metric Calculation Result
Difference per BTC $117,552 – $68,000 = $49,552
Total unrealized loss $49,552 × 4,000.85 ≈ $198.3 million
Percentage downside vs. cost‑basis ($49,552 / $117,552) × 100 ≈ 42.2 %
Percentage downside vs. market value ($198.3 M / $272 M) × 100 ≈ 73 %

Interpretation

  • If BTC stays at $68k: Empery's BTC portfolio is ~$198 M “underwater.”
  • If BTC falls further, the dollar loss will increase proportionally.
  • If BTC rises above ~$117,500, the company will break even on its historical cost.

4. Potential Down‑Side Scenarios

Scenario BTC price needed Resulting loss (if any)
Stable/flat (stay near $68k) No change ~‑$198 M (‑42 % vs. cost)
Mild recovery (≈ $90k) $90,000/​BTC $9 M gain (≈ +7 % vs. cost)
Moderate decline (≈ $50k) $50,000/​BTC $268 M loss (≈‑57 % vs. cost)
Severe crash (≈ $30k) $30,000/​BTC $352 M loss (≈‑75 % vs. cost)

The numbers above assume a linear relationship; actual results would be impacted by transaction costs, taxes, and potential liquidation discounts.

5. Key Drivers of Down‑Side Risk

Category Specific Factors Impact on Empery’s BTC Holding
Price volatility BTC historically swings ±30 % over a 12‑month horizon. Could exacerbate unrealized losses quickly.
Regulatory risk U.S. SEC or CFTC actions that limit BTC trading or impose heavy compliance costs. May suppress price and increase liquidity‑risk premium.
Liquidity risk Large, single‑entity holders can influence market depth when they sell. Potential discount if Empery needs to liquidate quickly.
Funding/financing risk If Empery uses BTC as collateral, a price fall could trigger margin calls. Could force a forced sale at a discount, deepening loss.
Company‑specific risk Corporate governance, insider‑selling, or a failure in the “Empery” product launch could erode confidence. Potential sell‑off of holdings by insiders or investors.
Macro‑economic risk Global recession, high‑interest rates, or a shift to “digital gold” alternatives can reduce BTC demand. Downward pressure on price.

6. Risk Mitigation Strategies Empery Might Employ

Strategy How It Helps
Diversify Allocate a portion of the BTC to other crypto‑assets or cash to reduce concentration risk.
Hedging Use BTC futures, options, or OTC forward contracts to lock in a floor price (e.g., a $100k put).
Staggered liquidation Sell in tranches to avoid market impact and capture higher prices if a rally occurs.
Liquidity reserve Keep a cash buffer to avoid margin calls if BTC falls sharply.
Transparency & Investor Communication Clear reporting reduces speculation and potential price pressure caused by uncertainty.

7. Bottom‑Line Takeaway

  1. Cost‑basis: $117,552 / BTC (≈ $470 M for 4,000.85 BTC).
  2. Current market value: ≈ $272 M at ~ $68,000 / BTC, representing a ~$198 M (‑42 %) unrealized loss.
  3. Potential downside is proportional to any further drop in BTC price – a 10 % decline (to ~$61k) would deepen the loss to ≈ ‑48 % vs. cost; a 50 % drop (to ~$34k) would push the loss to > ‑70 % of the original investment.
  4. Risk drivers (price volatility, regulatory changes, liquidity needs, and corporate execution) dominate the downside. Mitigation through hedging, diversification, and prudent cash‑management could limit the impact.

In short, the BTC holdings are currently deeply “underwater” relative to the historical purchase price, exposing Empery Digital to a significant downside risk if Bitcoin fails to rally above the $117k average cost. The company should consider hedging and diversification to reduce the potential impact of further price declines.

Other Questions About This News

What is the market's perception of the average purchase price of $117,552 per BTC relative to the current market price? Will this acquisition lead to dilution or use of cash reserves, and how will that impact liquidity? Will the company provide more details on financing (cash, debt, equity) used to fund the $10 million purchase? How will the increased BTC holdings affect Empery Digital's balance sheet and valuation metrics? What is the implied price target for EMPD given the recent BTC acquisition and current BTC price? How does the $10 million BTC purchase compare to the company's historical acquisition strategy? How does the $117,552 per BTC average cost compare to peers' crypto exposure? What is the expected timeline for future BTC purchases or potential divestitures? Could the increased BTC exposure affect the company's risk profile and require changes to corporate governance or risk management policies? How might the market price of EMPD react in the short‑term to the announcement? How might this news impact short‑term trading strategies and options positioning on EMPD? What are the potential catalysts (crypto market, regulatory changes) that could impact the value of the holding and therefore the stock? What are the tax implications and potential write‑offs associated with the new BTC acquisition? Could this acquisition lead to operational changes, such as the launch of new crypto‑related products or services? How will the additional BTC affect the company's debt-to-equity ratio and other key financial ratios? How does Empery's BTC position compare with other publicly traded crypto‑focused firms such as MicroStrategy or Riot? How might this acquisition influence institutional investor sentiment toward EMPD? What impact could the added BTC have on the company's earnings per share (EPS) and crypto-related revenue forecasts? Is there a risk of regulatory scrutiny or compliance issues related to holding large amounts of BTC?