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China’s leading beauty app spent $50 million on Bitcoin weeks before Beijing banned crypto. Now that investment is a blackhole on its books

July 4, 2022, 11:21 AM UTC
Visitors gather around a Meitu booth
Meitu warned investors on Friday that it might report a $52 million net loss for 2022 thus far—a 150% increase from the same period in 2021—due to the plunge in Bitcoin and Ether values.
Yang Enuo—VCG via Getty Images

Meitu is best known as the developer behind popular Chinese smartphone apps, like Meitu App and BeautyCam, which allow users to beautify their selfies for social media. Less known is the fact that the pioneering photo app, founded in 2008, is also one of the world’s top holders of cryptocurrency, ranking 12th among publicly-traded companies, according to CoinGecko.

But, with crypto markets crashing, that investment is dragging Meitu deep into the red.

On Sunday, in a filing with Hong Kong’s stock exchange, Meitu said that the company’s net loss for the first half of the year could range between $41 million and $52.3 million—more than double what it recorded the same period the year before—and pinned the mounting losses on the crashing value of its cryptocurrency assets.

“The expected increase in net loss is primarily due to the Acquired Cryptocurrencies Impairment,” Meitu said, warning investors to “exercise caution when dealing in the shares of the Company.” Meitu shares sank 10.5% by market close on Monday.

Meitu owns about 940 Bitcoin and 31,000 Ether, purchased for $49.5 million and $50.5 million respectively, the company says, which it bought between March and April 2021. On Sunday, Meitu said it was expecting to book impairment losses—the difference between what Meitu paid for cryptocurrencies and its current market value—of $27.1 million and $18.5 million on its Bitcoin and Ether acquisitions respectively.

Meitu did not immediately respond to a request for comment but in their filing the company claimed that these crypto losses would not affect the company’s cash flow or operations. The company appears to remain bullish on crypto, too, writing that although digital currencies are “prone to volatility”, Meitu believes that “adoption has ample room to grow given the blockchain industry is still developing rapidly, and cryptocurrencies are an integral part of that.”

Meitu’s ability to engage in the crypto space night be limited, however. Meitu bought into cryptocurrencies weeks before Chinese regulators barred financial institutions and payment companies from dealing with digital coins in May 2021, sparking a short slump in crypto markets. China later expanded its crypto ban to bar all transactions involving cryptocurrency, even with overseas entities.

In its filing, Meitu says it hasn’t bought or sold any cryptocurrency since China’s ban came into effect, even though other bullish companies have bought into the crash, viewing the slump in crypto prices as a discount buying opportunity.

Software company MicroStrategy, whose founder Michael Saylor is one of Bitcoin’s loudest proponents, revealed last Wednesday that it had bought an additional $10 million worth of Bitcoin in the past two months even though, according to Bloomberg, the company’s Bitcoin holdings have dropped about $3.4 billion in value between the end of Q1 2022 and today.

MicroStrategy is one of the largest public companies holding Bitcoin as an asset. The company owns almost 130,000 Bitcoin, or 0.6% of the total supply of the digital currency, notes CoinGecko.

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