Tesla’s Bitcoin Investment Fell $1 Billion Last Quarter Amid Crypto Market Crash

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A day after publishing second-quarter earnings, electric car maker Tesla revealed in a public filing Tuesday that the value of its bitcoin holdings fell by more than $1 billion in the last quarter from $2.5 billion at the end of March as the nascent cryptocurrency market nearly rebounded. From a near 40% crash, which wiped out all of the gains Tesla made from its initial investment of $1.5 billion, but has resulted in only modest losses so far.

key facts

In a filing on Tuesday, Tesla revealed that its stake in the cryptocurrency was worth about $1.5 billion, down about $1 billion from $2.5 billion on March 31.

The company did not disclose any cryptocurrency sales in the second quarter, confirming comments Musk made in May after speculation that Tesla sold more bitcoin, sending prices down 20% over four days.

The company also reported an impairment loss of $23 million, which was subtracted from gross profit in the quarter, as a result of its bitcoin holdings, reflecting the change in the value of bitcoin since the time of Tesla’s initial investment.

The automaker did not reveal the date of the purchase of bitcoin or the amount for which it was purchased – it only happened in the first quarter before February 8, when bitcoin prices ranged from about $30 thousand to $38 thousand.

Bitcoin prices, currently around $38,455, are up about 9% since the end of last quarter, meaning Tesla’s holdings are likely to be worth about $1.6 billion on Tuesday, assuming the company didn’t buy or sell any bitcoin in the quarter. the third.

Tesla shares rose 1.5% in pre-sale hours after the post-close earnings report smashed Wall Street expectations and revealed Tesla’s eighth consecutive quarterly profit — a record $1.1 billion, up tenfold from last year’s $104 million.

the shadow

Accounting rules require companies to treat bitcoin as an intangible asset, which means they must write down the value if the price goes down, but they can’t write the value if the price goes up, Jerry Klein, managing partner of $9 billion Treasury Consulting Partners, told Forbes by e-mail. “Corporate investors don’t get any of the sweets, but all the indigestion by investing in bitcoin,” he says.

main background

Bitcoin has seen a massive rise during the pandemic amid heightened inflationary fears and increased institutional adoption. Prices nearly doubled in February after Tesla revealed that it had invested $1.5 billion in Bitcoin and will begin accepting it as payment. Just two months later, the auto company revealed that it had sold about 10% of its bitcoin, generating more than $100 million from the transaction. And in May, the automaker reversed course on cryptocurrency, with Musk announcing that it would not accept bitcoin as payment until at least half of its mining was done using renewable energy. Prices crashed more than 50% from April’s record high above $63,000 and have since struggled to recover in light of the massive ban on crypto-mining in several Chinese provinces. As of Tuesday, prices are still about 40% below their peak levels.

What to watch

Business analytics firm MicroStrategy, which owns more bitcoin than any other company in the world, reported earnings on Thursday. Last month, the company said it expects to incur a loss of at least $284.5 million in the second quarter as a result of its bitcoin holdings. At the time, it held about 92,079 bitcoins on its balance sheet, worth about $3.6 billion on Tuesday but at one point worth more than $5 billion.

Amazing fact

Despite sometime crashing over 50% this year, the price of Bitcoin is still up about 250% over the past year.

in-depth reading

Tesla’s back-to-back earnings continue for the eighth quarter, boosted by record net income (Forbes)

Elon Musk remains ‘supportive’ of Bitcoin: ‘I own Bitcoin, Tesla owns Bitcoin, SpaceX owns Bitcoin’ (Forbes)

Bitcoin holdings from Tesla in reverse (Forbes)

Biggest Bitcoin Backer Expects $285 Million Loss After Crypto Crash — But It Wants To Raise $400 Million In Debt To Buy More (Forbes)

Tesla and SpaceX Billionaire Elon Musk Double Down on Dogecoin and Ethereum’s Plan to Beat Bitcoin Amid Crypto Price Bounce (Forbes)