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A plunge in Bitcoin's value has the potential to spell bad news for its staunchest corporate advocates over the coming weeks.

Following a stunning rise that lifted the stalwart cryptocurrency above $60,000 at certain points earlier in 2021, investors, financiers, and companies around the globe began to take a new look at the digital asset world. Then, Bitcoin took a hard fall. By the end of the second quarter, nearly all of the cryptocurrency's year-to-date gains had been erased. Bitcoin has more recently shown signs of a turnaround, with the price surpassing $40,000 briefly July 26.

Companies including Tesla, MicroStrategy, Square, and others have all made sizable bets on Bitcoin in recent years, snatching up the asset in hopes of getting out ahead of the crypto economy's maturation. And while Elon Musk's electric car maker shook off Bitcoin's tumble with ease in its latest earnings results, Wall Street still wonders how other crypto-minded companies will do in what could be a complicated earnings season.

"Bitcoin's a volatile investment, so the companies that invest corporate cash into Bitcoin have to be willing to accept unrealized losses on their earnings results," Treasury Partners Managing Director Jerry Klein told Fortune. "These companies that invest in Bitcoin are willing to take a level of risk with corporate cash investing that most companies have avoided."

Tesla

Under U.S. accounting laws, cryptocurrencies are classified as intangible assets. That means that a company holding Bitcoin on its corporate balance sheet would have to write down the asset's value, if and when it falls below the purchase price.

Elon Musk's Tesla provided investors with the latest glimpse into how Bitcoin’s latest fall would hit corporate earnings when its second-quarter results dropped July 26.

Just months after buying $1.5 billion worth of Bitcoin in the first quarter, the electric car maker recorded a “Bitcoin-related impairment” of $23 million in its earnings that were reported after the market’s close. Nonetheless, Tesla recorded quarterly profits of $1.1 billion — marking a 998% year-over-year spike, according to the company.

Musk has had a volatile public relationship with digital assets over the course of 2021. In February, Musk said Tesla would accept Bitcoin as payment from customers. Months later, Musk reversed the decision, citing the "rapidly increasing use of fossil fuels for Bitcoin mining." In spite of the back-and-forth, Musk has shown few signs of a waning interest in cryptocurrencies. The outspoken CEO recently said he personally owns Bitcoin, Ethereum and Dogecoin, while his aerospace and satellite communications company, SpaceX, also holds Bitcoin.

MicroStrategy

With more than $2.7 billion worth of Bitcoin, MicroStrategy is by far the largest corporate holder of cryptocurrency.

The company, led by Michael Saylor, which adopted “acquiring and holding Bitcoin” as part of its corporate strategy, recently added bought 13,005 more Bitcoins to bring its total count to 105,085, as of June 21.

MicroStrategy went so far as to recently conduct a $500 million junk bond offering to buy Bitcoin, which closed in mid-June. A week later, it conducted its latest Bitcoin purchase for a total price of $489 million in cash.

“What we’re seeing from MicroStrategy, Square, and others is a novel approach to the preservation of assets on a company’s balance sheet,” BTIG analyst Mark Palmer told Fortune.

Square

Square has been gradually building out its cryptocurrency capabilities for some time now, making it well positioned to capitalize on the recent flood of digital asset interest. Bitcoin revenues for Square that were generated in part by customers buying the cryptocurrency through its Cash App reached more than $3.5 billion in the first quarter alone, up from $306.1 million a year before.

Whether Jack Dorsey's Square can regularly duplicate that sort of increase is unlikely, as the company warned in its latest quarterly filing that the amount will “fluctuate depending on customer demand as well as changes in the market price of Bitcoin.”

And yet, all the while, Square has been stockpiling Bitcoin on its balance sheet too. It added $220 million worth of Bitcoin in the fourth quarter of 2020 and the first quarter 2021.

BTIG’s Palmer does expect to see Square, as well as MicroStrategy, take on “significant” impairment charges in their upcoming earnings results. However, the fintech and digital asset analyst says investors will be more concerned with what is happening at Square “writ large.”