Even in the current bear market, Tesla has earned an attractive profit by selling many of its Bitcoin holdings.
Tesla disclosed in its 10-Q filing that it had earned a profit of $64 million from the sale of 75% of its bitcoin (BTC) holdings, which brought in $936 million in net revenue for the company in the second quarter.
In the same filing, Tesla also documented a $170 million impairment loss on its remaining holdings for the first half of 2022. The company mentioned, “changes to the carrying value” of the company’s bitcoin as the reason for the loss.
Financial impairment denotes the loss of a firm’s assets. An asset is considered impaired if its projected benefits are less than its worth as filed in the account sheet.
This is in line with the fact that Bitcoin was hovering around $18,700 at the end of the second quarter, and Tesla’s average acquisition cost is estimated to be around $29,000 per BTC.
At the start of 2021, Tesla invested $1.5 billion in Bitcoin. A couple of months later, Later in the first quarter, the firm reduced its Bitcoin holdings by 10 percent; this sale increased earnings by $272 million during that period.
Tesla’s latest Bitcoin sale has similar motives. In an earnings call, CEO Elon Musk emphasized that the sale should not be seen as a “verdict on Bitcoin”. Rather, it was a move to raise money amid liquidity concerns surrounding the COVID-19 lockdown in China earlier this year.
This is supported by the fact that Tesla reserved a quarter of its BTC holding instead of parting with it completely. “I would not be surprised if Tesla keeps nibbling on Bitcoin when Bitcoin stabilizes, otherwise they would have sold 100 percent,” Markus Thielen, Chief Investment Officer at IDEG, told Cointelegraph.
However, the move impacted prices, with BTC dipping about 2 percent after the release of Tesla’s second-quarter report. Prices later improved after Musk’s reassuring comments on the earnings call. Yet, market reactions have been rather flat compared to Tesla’s initial $1.5 billion BTC investment, which caused a sharp spike of $3,000 in bitcoin prices, taking it to an all-time high of $43,000 at the time.
According to data from Bitcoin Treasuries, Tesla has around 10,800 BTC after its newest sale, which is valued at $228 million, with Bitcoin trading at $21,094.14 at the time of writing.
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