Tesla Records $51 Million Impairment Loss on its Bitcoin Holdings in Q3
Nicholas Otieno Oct 22, 2021 03:50
Tesla has announced that it experienced an impairment loss of $51 million on its Bitcoin investments in Q3. The company’s investment in Bitcoin fell, driven by relative instability in the crypto’s price experienced during that period.
Tesla electric vehicle maker has published its Q3 earnings report, showing that the company had an impairment loss of $51 million in its Bitcoin holdings.
As per the Q3 earnings presentation, Tesla reported no new purchases or sales of Bitcoin, and currently, the firm holds $1.26 billion in Bitcoin investments.
According to accounting rules for digital assets, if the price of an asset reduces during a particular quarter, a company is expected to report an impairment. Still, if the price rises, such an increase is not reported as a gain on the balance sheet.
In Q3, from 1st July to 30th September 2021, Tesla had a $51 million impairment loss on its Bitcoin holdings. Although the price of Bitcoin rose roughly 30% to $43,000 in the third quarter, the company attributed such a loss due to a decline in the value of the token, especially a time when the flagship cryptocurrency plunged to $29,000 in July and even fell as low as $40,000 in September.
According to the accountant’s statement, Tesla’s Bitcoin holdings dropped by $51 million to $1.26 billion in the July - September period, and that was down from $1.31 billion in the second quarter.
The Success of Tesla’s Crypto Bet
However, Tesla can no longer be said to be impaired by its Bitcoin holdings.
Tesla’s investment in cryptocurrency has been an excellent one when considering the actual gains that Bitcoin has made from January to today.
As reported by Blockchain.News in February, the company purchased its Bitcoin worth $1.5 billion as part of its balance sheet when the prices of the leading crypto were trading at around $34,000.
As per a Q1 filing with the Securities and Exchange Commission, Tesla stated on 31st March that the value of its Bitcoin investments amounted to $2.48 billion.
During that time, the price of Bitcoin was trading at $59,000 and the company indicated that it held 42,000 Bitcoins.
Another important point to note is that Tesla makes more money by selling Bitcoins.
In late April, Elon Musk, the CEO of Tesla, announced that the firm sold 10% of its Bitcoin holdings to demonstrate that it is a good alternative to cash. Musk was responding to comments from Dave Portnoy, the Barstool Sports founder, who questioned whether Tesla had profited from a Bitcoin pump-and-dump scheme, a practice that encourages investors to boost the price of an asset-based on exaggerated statements.
Amid this week’s new highs, one Bitcoin was trading at around $63,019, according to the current price, which means that Tesla holds over $2.67 billion in Bitcoin, an increase of more than a billion dollars since Q1.
But according to the quirky accounting rules, Tesla cannot ever revise the value of its bitcoin upwards. It can only recognize any gains if it sells the digital asset.
Image source: Shutterstock