Tesla Sells Bitcoin for $64M Profit, Still Posts $170M Impairment Loss

Tesla made millions when it offloaded 75% of its bitcoin last quarter, but accounting rules mean it still took a hit to its balance sheet

article-image

Elon Musk | Blockworks Exclusive Art by Axel Rangel

share

key takeaways

  • For accounting purposes, Tesla must value its bitcoin at its lowest point during a quarter
  • Tesla sold 75% of its BTC but Elon Musk said it’s open to buying more

Plunging bitcoin prices have forced Tesla to record a $170 million impairment loss alongside solid second-quarter earnings, which saw a 42% jump in revenue.

Tesla spent $1.5 billion to acquire around 43,200 BTC in the first quarter of 2021, per Bitcoin Treasuries data. It went on to sell 10% of its bitcoin for $272 million that same quarter. 

At the time, CFO Zach Kirkhorn commented Tesla’s bitcoin investment was long-term and those sales were just an experiment to demonstrate bitcoin’s liquidity and utility as an alternative reserve asset.

But last week, Tesla reported selling 75% of its bitcoin in this year’s second quarter for $936 million.

“As with any investment and consistent with how we manage fiat-based cash and cash-equivalent accounts, we may increase or decrease our holdings of digital assets at any time based on the needs of the business and our view of market and environmental conditions,” the company said in an SEC filing.

Digital assets are considered to be “indefinite-lived intangible assets” under accounting rules. For that reason, Tesla must value its bitcoin at its lowest point during a quarter and recognize a loss if it drops below its purchase price. 

Similarly, Tesla can recognize any gains if it sells its digital assets. The electric-vehicle maker posted a $64 million gain on certain conversions of BTC into fiat currency in the six-month period ending June 30, when the asset’s price was around $19,000.

Arcane Research analyst Vetle Lunde estimates Tesla sold 29,060 BTC at an average price of $32,209, leaving the company with about 9,700 BTC ($205.1 million) on its balance sheet.

The company’s bitcoin sale during the financial market downturn shows it was forced to manage risk and raise cash in a rising interest-rate environment, said Marcus Sotiriou, an analyst at GlobalBlock.

In any case, Tesla still boasts the second-largest BTC stash of any public company, behind Michael Saylor’s data intelligence firm MicroStrategy, which currently holds 129,698 BTC ($2.74 billion).

Elon Musk says Tesla sold bitcoin to boost liquidity

Tesla CEO Elon Musk, who has been a vocal cryptocurrency proponent, to some degree held an influential position on the price movement of cryptocurrencies last year via his tweets. Markets were often swayed by his comments and closely observed Tesla’s crypto purchases. 

Bitcoin is down 55% year-to-date, and last traded at $21,100 as of 1:15 am ET on Tuesday, Blockworks Research data shows. But the bellwether crypto asset may have reached its macro bottom at around $18,000, according to Varun Kumar, CEO of Hashflow.

“Barring any exogenous shocks to the macroeconomic picture, it seems unlikely to go lower,” he told Blockworks via email. “That’s not to say that it can’t — but crypto has front-run other markets in terms of pricing an extremely negative global economic outlook.”

“I suspect, then, that like the 2018 bear market, we will range sideways and gradually upwards until the macro conditions improve. And when that happens, perhaps in a year’s time, we might be headed for another bull run.”

Musk said in an earnings call last week that Tesla is open to buying bitcoin in the future. “It’s just that we were concerned about overall liquidity for the company, given Covid shutdowns in China,” he added, noting his company did not sell any of its dogecoin.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Permissionless is a conference for founders, application developers, and users. Come meet the next generation of people building and using crypto.

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates (6).png

Research

In recent months, a number of highly accretive developments were implemented across the protocol to improve fee capture, expand product functionality, and ultimately drive value accrual to the RUNE token, with more upgrades on the immediate horizon. These developments include hiking the minimum swap fee parameter to increase revenue, adding a Burn System Income Lever to reduce the RUNE supply, the addition of COSM-WASM smart contracting and IBC to enable an application layer, new chain integrations, and more.

article-image

A repayment plan has officially been approved, nearly two years after FTX went bust

article-image

Coinbase filed an interlocutory appeal in its case against the SEC earlier this year

article-image

FTX “never had the crypto” to make in-kind distributions, witness says at FTX’s confirmation hearing

article-image

Lucid Ventures co-founder Meta said they don’t think Solana is “abnormal” in the VC world, where it’s “standard” for many projects to fail

article-image

Plus, Polymarket hits all-time highs in daily trading volumes

article-image

Bitcoin is now in the second half of its bull market, if the previous ones are anything to go by