Tesla, a maker of electric vehicles disclosed a loss on its net Bitcoin holdings of $140 million in a recent SEC filing. A $204 million gross impairment loss on its Bitcoin assets was reported to the U.S. Securities and Exchange Commission (SEC) by the Elon Musk-led EV innovation business in 2022. The term “impairment loss” describes the decline in the asset value of Bitcoin as a result of the erratic economic conditions brought on by the 2022 crypto winter.
The business also disclosed that it had made $64 million by trading BTC for fiat currencies at various points during the year, resulting in a net loss from BTC trading of $140 million in 2022.
The report claims,
“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. 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.”
Tesla stated in its papers that it invested a total of $1.5 billion in Bitcoin during the first quarter of 2021. Elon Musk, the firm’s founder, declared that the company will now accept Bitcoin from its American clients. Just a few months later, Musk claimed that for the payment system to continue in the future, Bitcoin must switch to using clean energy.
In the second quarter of 2022, the business sold off 75% of its BTC holdings due to liquidity issues following the two-month outage of the Tesla Gigafactory in Shanghai due to Covid-19.
The sell-off generated $936 million for the firm at the point of sale, but the decline in the value of the cryptocurrency resulted in a net loss for the company of $106 million.
After then, the company stopped selling any more of its BTCs. Tesla continued to hold onto its 9720 BTCs for the duration of the second half of the year, according to its most recent earnings reports for the fourth and final quarter of 2022.
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