July 31 (Reuters) - Strategy reported its first profit in six quarters on Thursday, as the biggest corporate holder of bitcoin benefited from a remarkable quarter for cryptocurrencies.

Strategy shares dropped 1.6% in extended trading.

In a watershed moment of legitimacy for the crypto industry, U.S. President Donald Trump signed the GENIUS Act into law earlier this month.

Industry anticipation leading up to the moment helped rally bitcoin — the largest cryptocurrency — past $120,000 for the first time as investors cheered Washington's long-awaited approval on digital assets.

Strategy held 597,325 bitcoins as of June 30, at an average cost of $70,982. Bitcoin currently trades around $116,600.

It recorded a $14 billion unrealized fair value gain on digital assets during the quarter that saw corporations ranging from major U.S. banks to payment firms embrace crypto.

Until the fourth quarter of 2024, the company could only record losses when bitcoin's value fell below its purchase price, but could not recognize price increases unless it sold bitcoin.

The company's net profit was $9.97 billion, or $32.60 per share, for the three months ended June 30, compared with a loss of $102.6 million, or 57 cents per share, a year earlier.

Strategy began buying bitcoin with cash in 2020 and then started issuing low-cost convertible bonds and stock sales to finance its accumulation drive.

Its shares are up nearly 39% this year, eclipsing bitcoin's 25% climb, a phenomenon that has now inspired several public companies to pivot their operations and mimic founder and executive chairman Michael Saylor's buy-and-hold treasury approach.

"We're in a hyper-growth, hyper-adoption phase for bitcoin as a treasury reserve asset," said Saylor on a post-earnings call.

A few among these companies are now also pivoting to smaller tokens like ether, often listing via mergers with blank-check vehicles to wrap crypto assets into equity.

Strategy's stock nearly fivefold last year, helping it secure a spot in the Nasdaq 100 index in December.