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Tesla Discloses $170 million Bitcoin Losses

Steve Miley trader
Updated 25 Oct 2022

Trade Cryptos Here Your Capital Is At Risk

Key points:

  • Tesla Reports $170 Million Impairment Loss on Bitcoin Investment
  • Bitcoin Holding, Accounting Rules and Impairment Loss
  • The E-Car Company Comments on Crypto Volatility and Hacks

The e-car company, Tesla has reported a $170 million impairment loss on its Bitcoin investment in Q3 2022 and has highlighted the risks of digital asset volatility and threat from attacks and hacks.

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Tesla Reports $170 Million Impairment Loss on Bitcoin Investment

In February 2021, Tesla stated it had bought Bitcoin to the value of $1.5 billion in order to deliver “more flexibility” alongside “further diversify and maximize returns on our cash.”

Fast forward to 10-Q regulatory filing on 24th October and Tesla stated that in the first nine months of 2022, “we recorded $170 million of impairment losses resulting from changes to the carrying value of our bitcoin“. In addition, the firm gained $64 million “on certain conversions of bitcoin into fiat currency,” thus made a net $106 million loss on the bet.

In April 2022, Tesla declared it had sold 75% percentage of its Bitcoin holding to assess the liquidity of the cryptocurrency. In the second quarter of 2021, the e-car company recorded a $23 million impairment loss due to losses from the price of cryptocurrencies.

Tesla did not buy or sell any Bitcoin holdings in Q3 2022 and still holds approximately $218 million of the flagship cryptocurrency.

Also read: Crypto Watch: DeFi News Today

Bitcoin Holding, Accounting Rules and Impairment Loss

Bitcoin is seen as a collectible according to accounting rules, which then follows that cryptocurrency investments are usually held at a cost. From an accounting perspective, it is required that corporates need to recognize impairment charges if the fair value of the collectible, in this case the cryptocurrency, falls below its carrying value.

The E-Car Company Comments on Crypto Volatility and Hacks

In the aforementioned regulatory filing from this week, the company also highlighted the risks involved with holding digital assets, including Bitcoin. They stated, “the prices of digital assets have been in the past and may continue to be highly volatile, including as a result of various associated risks and uncertainties,” also adding “for example, the prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable.”

The e-car manufacturer also highlighted issues with crypto attacks and hacks, stating in the filing, “their lack of a physical form, their reliance on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence.”

 

 

Steve has 29 years of financial market experience including 3 years at Credit Suisse and 15 years at Merril Lynch. Steve is the Academic Dean for The London School of Wealth Management and has won many awards from Technical Analyst Magazine.