Bitcoin fair value under US GAAP is measured using ASC 820. It is the price the company would receive to sell its Bitcoin in an orderly transaction in its principal market, at the measurement date. For most companies, that price is a quoted price in an active market, which places Bitcoin at Level 1 of the fair value hierarchy.
The concept is simple. The application needs care, because Bitcoin trades on many venues, around the clock, at slightly different prices. This article explains how to choose the principal market, which price to use and what auditors will expect to see. IFRS 13 uses substantially the same framework, so the same thinking applies to IFRS reporters using the revaluation model or measuring recoverable amount.
What Bitcoin fair value means
ASC 820 defines fair value as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Four features matter for Bitcoin.
- It is an exit price. It is the price to sell, not the price to buy. Where a market quotes separate bid and ask prices, ASC 820 requires the price within the spread that is most representative of fair value. Mid-market pricing is a practical expedient that is permitted, but the policy must be consistent.
- It is market-based. It reflects what market participants would pay, not the company's own view of value.
- It excludes transaction costs. Commissions and fees are not deducted. They are a feature of the transaction, not of the asset.
- It is measured at a point in time. The measurement date and time must be specified, which matters for an asset that never stops trading.
The FASB standard on digital assets (ASU 2023-08) requires in-scope Bitcoin to be measured at fair value at each reporting date. ASC 820 tells you how. See ASU 2023-08: fair value accounting for Bitcoin explained.
Identifying the principal market
The principal market is the market with the greatest volume and level of activity for the asset, among the markets the company can access. Fair value is the price in that market, even if a better price is available elsewhere.
A practical approach:
- List the markets you can access. These are the venues and counterparties where the company, or its execution provider on its behalf, can actually transact at the measurement date. A market you have no account with and no route to is not accessible.
- Gather volume and activity data. Compare trading volume and activity for Bitcoin against the company's reporting currency across those markets.
- Select and document. The market with the greatest volume and activity is the principal market. Record the analysis and the data behind it.
- Review periodically. Market share between venues changes. Revisit the analysis at least annually, and when the company's access changes.
ASC 820 allows a company, without an exhaustive search, to presume that the market in which it normally transacts is the principal market, unless there is evidence otherwise. Where no principal market can be identified, the most advantageous market is used: the one that maximises the amount received after transaction costs. The costs are used only to select that market. They are still not deducted from the price.
Over-the-counter markets are part of the picture. Many large corporate trades are executed through OTC desks, and those principal-to-principal markets can be relevant. But OTC prices are rarely published in a way that supports a period-end measurement, so most companies anchor to an observable venue price. See what is a Bitcoin OTC desk?.
The fair value hierarchy
ASC 820 ranks the inputs used to measure fair value.
| Level | Input | Typical Bitcoin example |
|---|---|---|
| Level 1 | Unadjusted quoted price in an active market for the identical asset, accessible at the measurement date | Last traded or mid price on the principal market venue at the cut-off time |
| Level 2 | Observable inputs other than Level 1 prices | A composite or reference rate that is adjusted, or does not represent a single accessible market |
| Level 3 | Unobservable inputs | Rare for Bitcoin itself; may arise for restricted or illiquid structures holding it |
Bitcoin generally qualifies for Level 1. That has a consequence that surprises some boards.
No discount for size
At Level 1, fair value is the quoted price multiplied by the quantity held. ASC 820 prohibits a blockage factor: a discount reflecting that selling a large holding at once would move the market.
A company holding a very large position measures it at the quoted price, even if it could not realistically sell all of it at that price in one trade. The market impact of a large sale is real, and treasury teams should plan for it. But it is an execution consideration, not an accounting one. See selling a large Bitcoin position without moving the market.
Pricing sources, cut-off times and indices
Three policy decisions turn the principles into a number.
The cut-off time
Bitcoin trades continuously. The policy must fix the exact time used for period-end measurement, such as midnight in the company's reporting time zone or midnight UTC. Pick one, document it and apply it every period. Changing the time to obtain a better number will draw audit attention.
The pricing source
The price should come from the principal market, captured at the cut-off time, and retained as evidence. Many companies use a data vendor to deliver venue prices. The key question is whether the vendor's figure is the principal market price, or something else.
Reference rates and indices
Reference rates that average prices across several venues are widely used. They are convenient and resistant to manipulation. But an average across markets is not, by definition, the price in one principal market. If an index is used, document why it is a reasonable representation of the principal market price, and consider whether it affects the hierarchy level. Agree the approach with your auditor in advance.
CFO tip: write a one-page Bitcoin pricing policy before your first period-end: principal market, data source, cut-off time, fallback source if the primary is unavailable, and who signs off. It is the single document auditors ask for most.
Controls and evidence
Auditors will test both the price and the process. Expect requests for:
- The principal market analysis and the volume data supporting it.
- Screenshots or data extracts showing the price at the cut-off time.
- Evidence of independent review of the period-end price.
- An explanation of any change in source or methodology.
For the wider control environment, see internal controls over Bitcoin for finance teams and the audit readiness checklist. Companies should take their own accounting, tax and legal advice on their measurement policy.
How The Bitcoin World helps
We help finance teams map the markets they can access, document a pricing policy and align execution reporting with period-end valuation. We work alongside your auditors and advisers. Execution and custody are carried out by licensed third-party institutions. See our OTC liquidity and corporate treasury services, or the glossary.