Electric vehicle maker Tesla released its third quarter earnings report showing the company had an impairment loss of $ 51 million on its Bitcoin holdings.
Tesla reported no new purchases or sales of Bitcoin, and the company currently holds $ 1.26 billion in Bitcoin investments, according to its third-quarter earnings presentation.
Under digital asset accounting rules, a company is expected to report an impairment if the price of an asset falls during a given quarter. However, if the price increases, such increase will not be shown as a profit on the balance sheet.
In the third quarter, July 1 through September 30, 2021, Tesla had an impairment loss of $ 51 million on its Bitcoin holdings. Although the price of Bitcoin rose around 30% to $ 43,000 in the third quarter, the company attributed such a loss to Bitcoin’s depreciation sign, especially at a time when the flagship cryptocurrency slumped to $ 29,000 in July and even dropped to $ 40,000 in September.
According to the accountant, Tesla’s bitcoin holdings decreased $ 51 million to $ 1.26 billion in the period July through September, from $ 1.31 billion in the second quarter.
The success of Tesla’s crypto bet
However, it can no longer be said that Tesla is affected by its Bitcoin holdings.
Tesla’s investment in cryptocurrency has been an excellent one considering the actual profits Bitcoin has made from January to date.
As Blockchain.News reported in February, the company bought its $ 1.5 billion worth of Bitcoin as part of its balance sheet when the leading cryptocurrency was trading at around $ 34,000.
According to a Q1 filing with the Securities and Exchange Commission, Tesla announced on March 31 that its Bitcoin investments were worth $ 2.48 billion.
During that time, Bitcoin’s price was trading at $ 59,000 and the company said it held 42,000 bitcoins.
Another important point is that Tesla makes more money selling bitcoins.
In late April Elon Musk, Tesla’s CEO, announced that the company had sold 10% of its Bitcoin holdings to show that it was a great alternative to cash. Musk was responding to comments from Barstool Sports founder Dave Portnoy, who questioned whether Tesla had benefited from a Bitcoin pump-and-dump program, a practice that encourages investors to base the price of an asset on it to increase exaggerated statements.
Amid this week’s new highs, a bitcoin was trading at around $ 63,019 at current price, meaning Tesla holds over $ 2.67 billion in bitcoin, an increase of more than $ 1 billion since the first Quarter.
But according to the bizarre accounting rules, Tesla can never revise the value of its Bitcoins upwards. It can only see profits if it sells the digital asset.
Image source: Shutterstock