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EV tycoon Tesla Inc is about to make losses due to impairment on its Bitcoin losses.
Tesla revealed its $1.5 billion worth of Bitcoin acquisition in a filing with the US Securities and Exchange Commission (SEC) on February 8th. The company declared that the decision was part of its updated investment policy, which was approved by the Audit Committee of Tesla’s Board of Directors. According to the policy, Tesla can invest a portion of its cash in alternative reserve assets, like BTC. Other alternative reserve assets Tesla Inc (NASDAQ: TSLA) has access to include gold bullion and gold-exchange funds. The investment also influenced the digital asset’s price, jumping 13% to trade at about $44,000. However, Bitcoin has crashed to an 18-month low, resulting in losses for Tesla.
Tesla Faces Likely Losses Amid Heavy Bitcoin Dip
Many companies are suffering from the Bitcoin decline, and many investors are counting losses. As a matter of fact, a lot of crypto companies started reducing headcounts and laying-off staff. Bitcoin has lost more than 50% since Tesla’s purchase. As of June 30th, the last day in the company’s second financial quarter, Bitcoin was at $19,000. Tesla’s Bitcoin investment is worth an estimated $820.82 million at that price. Three months ago, Tesla said its Bitcoin value was $1.26 billion. Although the holdings were close to $2 billion at market value, accounting prices mean Tesla does not register gains on its investment until they are sold. Considering the ongoing Bitcoin losses, Tesla may record a decline of $44 million in its Q2 quarterly result.
Bitcoin’s performance since the beginning of the year has been terrifying. The constant plunges have also affected other cryptocurrencies such as ETH, LTC, and others. While BTC traded at $46,700 at the beginning of 2022, crypto has dropped significantly since then. Between January and now, BTC has lost over 60% of its value. The digital asset has shed nearly 75% since its ATH in November last year.
Tesla and Elon Musk have been significant influencers on Bitcoin. Bitcoin also added some gains when Tesla announced it as a payment method in 2021. The automaker said its customers could begin to pay for vehicles purchased using Bitcoin. However, the company suspended the payment method after Musk raised concerns about BTC energy use.
At writing, Tesla is at after-hours trading of $679.80. The current trading price is down 0.29% over its previous close of $681.79. Tesla boasts a market valuation of more than $706 billion, having increased 0.43% in a year.