Tesla Reported $23M Impairment From Its BTC Holdings

Tesla reported $23M impairment from its Bitcoin holdings as the number one cryptocurrency took a hit and Tesla followed so let’s read more in our latest Bitcoin news today.

Elon Musk’s Tesla released its quarterly earnings results and reported more than $1 billion in profits for the first time since its launch. However, it’s not all fun and games. To the delight of Elon’s Twitter fans and haters, Tesla reported $23M impairment from the BTC holdings after the markets crashed in the second quarter of 2021. oddly enough, the only mention of BTC appears in the profitability section of the report which shows:

“Positive impacts were partially offset by growth in operating expenses including increased SBC, Model S/X ram (negative margin in Q2), additional supply chain costs, lower regulatory credit revenue, Bitcoin-related impairment of $23M and other items.”

The $23M loss could seem digestible considering that Tesla invested about $1.5 billion in BTC. About 50% drop came from its ATH and could trigger more concerns among investors especially those that fear for a continuation of the downtrend that will accelerate upon Bitcoin’s drop below $30K. the statistics may be due more to the exploitation of the legal loopholes than to the actual monetary losses. According to the US norms, the accountants will have to record the value of their crypto investments at the time they get procured. If cryptos go up in price, nothing happens as long as the company holds still. The business only has to record transactions in case of a sale but when prices go down, the company has to record the decrease in the investment as an impairment charge.

Therefore, even though sales gains could be recorded, so the tax incidence could be softened by the declines during the time the company holds the tokens. This is due to the classification of cryptos as an “indefinite-lived intangible asset.” all the haters however don’t have much to celebrate as it is all about technicality. On the second thought, $22 million seems like a spare change for the billionaire. Tesla’s BTC purchase was crucial to the BTC price history. After a brief exchange of tweets between Michael Saylor and Elon Musk, Tesla announced a huge purchase that put it on the center spot of publicly traded companies with the most significant BTC holdings.

 

As a result, the price of BTC skyrocketed at a frantic pace and reached an ATH in April 2021 while at that time, Tesla made more money with BTC than it did with the entire car production. However, the company’s announcement to stop making payments in BTC because of its environmental implications caused a huge panic on the market which ended with a 50% drop as days passed. Recently, Elon Musk acknowledged that Tesla could accept BTC again if the network becomes more environmentally friendly.