Meitu's High-Profit Bitcoin Sell-Off: A Strategic Choice in a Volatile Market

Meitu's High-Profit Bitcoin Sell-Off: A Strategic Choice in a Volatile MarketOn the evening of December 4th, Meitu announced the sale of its entire holding of approximately 31,000 Ethereum (ETH) and 940 Bitcoin (BTC), generating approximately $180 million in cash proceeds. This resulted in a net profit of around $79

Meitu's High-Profit Bitcoin Sell-Off: A Strategic Choice in a Volatile Market

On the evening of December 4th, Meitu announced the sale of its entire holding of approximately 31,000 Ethereum (ETH) and 940 Bitcoin (BTC), generating approximately $180 million in cash proceeds. This resulted in a net profit of around $79.63 million (approximately RMB 571 million). This move, occurring just as Bitcoin breached the $100,000 mark, attracted significant market attention and highlighted the high volatility and risk inherent in the cryptocurrency market.

Meitu initially purchased approximately 31,000 ETH and 940 BTC in March and April 2021, for a total cash consideration of roughly $100 million. The acquisition costs were approximately $1,629 per ETH and $52,660 per BTC, respectively. The sale generated substantial profits; approximately 80% of the net profit will be used to pay a special dividend, while the remainder will be allocated to general operating capital for the development of its image and design products based on a paid subscription model.

The announcement indicates Meitu's increased focus on its core image and design product business. This strategic adjustment aligns with the company's financial performance in the first half of 2024. The H1 2024 report shows adjusted net profit attributable to owners of the parent company reached RMB 270 million, an 80.3% year-on-year increase. Paid subscribers exceeded 10.81 million, a 50.1% year-on-year growth, and revenue from image and design products based on paid subscriptions reached RMB 930 million, a 54.5% year-on-year increase, accounting for 57.4% of total revenue. These figures demonstrate the robust growth and increasing profitability of Meitu's core business.

Meitu's first cryptocurrency purchase was on March 5th, 2021, when it acquired 15,000 ETH and 379.1214267 BTC for a total value of approximately RMB 312 million. However, the drastic price fluctuations in the cryptocurrency market presented challenges. On July 3rd, 2022, Meitu announced an expected net loss of RMB 274.9 million to 349.9 million for the first half of 2022, primarily due to the impairment of its cryptocurrency holdings. This high-point sell-off undoubtedly offset previous losses and generated significant additional revenue.

It's noteworthy that on December 5th, the day after Meitu announced its cryptocurrency liquidation, Bitcoin surpassed $100,000, experiencing a 4% intraday surge to reach an all-time high. Bitcoin's cumulative increase this year reached 140%. This rapid surge, with prices rising from $68,000 to $100,000 in just one month, further underscores its high volatility.

However, Bitcoin's continuous rise also sparked market concerns. Yu Jianing, President of Uweb, Co-chair of the Blockchain Special Committee of the China Communications Industry Association, and Honorary Chairman of the Hong Kong Blockchain Association, cautioned that while the $100,000 milestone generated positive market sentiment, a short-term correction remains a possibility. He advised investors to exercise caution, offering the following recommendations:

Firstly, investors should clarify their investment objectives and risk tolerance. Bitcoin, as a highly volatile digital asset, possesses financial, industrial, and technological attributes, being highly financialized and thus susceptible to cyclical financial patterns ("what goes up must come down, and what goes down must go up"). Historically, Bitcoin has experienced significant corrections after surpassing key price levels. Investors should be wary of potential market corrections and avoid overlooking risks due to excessive optimism.

Secondly, investors need to maintain market awareness and expertise. Digital assets differ significantly from traditional investment assets, with distinct underlying rights mechanisms and technological support. Before investing in digital assets, a thorough understanding of blockchain technology, distributed business logic, and the digital financial system is crucial for comprehending the intrinsic value of these assets and effectively managing investment risk.

Thirdly, investors should manage their asset allocation and risk, particularly avoiding high leverage. While high leverage can magnify returns in the short term, it also amplifies potential risks, especially during periods of significant market volatility. Investors should allocate assets based on their risk tolerance, ensuring portfolio diversification to mitigate the impact of market fluctuations. A long-term investment strategy should be adopted to avoid short-term speculative profits and impulsive decisions driven by market sentiment, thereby minimizing losses during extreme market volatility.

Meitu's high-point sell-off serves as a lesson for other companies investing in cryptocurrencies. In volatile markets, prudent risk management and flexible investment strategies are critical. Focusing on core business operations and adapting investment strategies to market changes are essential for achieving long-term, stable growth in the challenging cryptocurrency market. Meitu's decision to liquidate its holdings near Bitcoin's all-time high demonstrates a cautious risk management approach, laying a more solid foundation for its future development. However, this doesn't negate investment opportunities in the cryptocurrency market; investors should still carefully assess risks and invest rationally based on their individual circumstances.