- Cryptocurrency remains on Tesla’s balance sheet
- Treating bitcoin as an asset – it’s just business
- On guard of nature protection
The electric car maker invested $1.5 billion in bitcoin in February 2021, which looked like a sign of confidence in the cryptocurrency.
In the second quarter, approximately 75% of all available bitcoins were converted to fiat currency. The timing is unfortunate as the cryptocurrency market struggles to recover after months of falling prices, which resulted in more than $2 trillion evaporating in just nine months.
Bitcoin, for example, has lost more than 67% of its value since hitting a record high of $69,044.77 on Nov. 10, according to CoinGecko. Ethereum, the second-largest digital currency on the market, is also down 69% from its record November high of $4,878.26.
Prices have stabilized in recent days, but Tesla’s bitcoin sales could upset the delicate equilibrium again.
“As of the end of Q2, we have converted approximately 75% of our Bitcoin purchases into fiat currency,” the Model Y and Model 3 maker said in a press release. “Conversions in Q2 added $936M of cash to our balance sheet.”
According to the SEC, Tesla still had about 42,000 bitcoins worth $1.26 billion on its balance sheet at the start of Q2. So, if the group sold 75% and collected $936 million from that transaction, it turns out that the company sold its bitcoins at an average price of $29,000. Bitcoin ended the second quarter at about $19,400 per unit. Between April 1 and June 30, which corresponds to the second quarter, the king of cryptocurrencies lost at least 58% of its value. In fact, by selling its bitcoins at an average price of $29,000, Tesla was able to avoid major impairment losses, but seems to have lost a total of $106 million. The company now has $218 million worth of bitcoins left in its account.
Selling 75 percent of its bitcoins is an impressive turnaround from Tesla, which still said it believes in cryptocurrency in a document filed with the Securities and Exchange Commission on April 25.
“We believe in the long-term potential of digital assets both as investments and as a liquid alternative to cash,” the company wrote in a statement.
However, the company warned: “As with any investment and consistent with how we manage fiat-based cash and cash-equivalent accounts, we may increase or decrease our holdings of digital assets at any time based on the needs of the business and our view of market and environmental conditions.”
“Digital assets are considered indefinite-lived intangible assets under applicable accounting rules. Accordingly, any decrease in their fair values below our carrying values for such assets at any time subsequent to their acquisition will require us to recognize impairment charges, whereas we may make no upward revisions for any market price increases until a sale.”
Tesla further stated: “For any digital assets held now or in the future, these charges may negatively impact our profitability in the periods in which such impairments occur even if the overall market values of these assets increase. For example, in the year ended December 31, 2021, we recorded approximately $101 million of impairment losses resulting from changes to the carrying value of our bitcoin and gains of $128 million on certain sales of bitcoin by us.”
On Feb. 8, 2021, Tesla invested $1.5 billion in virtual currency and said it would begin accepting it as payment for the purchase of Tesla vehicles.
The move came days after CEO Elon Musk temporarily changed his Twitter bio to simply #bitcoin. The announcement was seen as a sign of confidence in cryptocurrencies. Bitcoin prices then jumped above $42,000.
Tesla claims that these investments in bitcoins were aimed at diversifying sources of liquidity and gaining flexibility in order to be able to significantly reward its shareholders.
But a few months later, in May 2021, Tesla indicated that it no longer accepts bitcoins as a means of payment. As a reason, they indicated their desire to preserve the environment, since bitcoin mining consumes a huge amount of electricity.
According to a Nature study, if nothing is done, by 2024 Chinese IT mines will produce 130.5 million metric tons of carbon dioxide emissions, which is almost equal to the total annual greenhouse gas emissions from greenhouses in Italy or Saudi Arabia.