The drop in bitcoin prices has forced tesla to post a $170 million impairment loss along with strong second quarter earnings, with revenue up 42%.
tesla spent $1.5 billion to acquire around 43,200 btc in the first quarter of 2021, according to data from bitcoin treasuries. he went on to sell 10% of his bitcoin for $272 million that same quarter.
Reading: Did tesla sell bitcoin
at the time, chief financial officer zach kirkhorn commented that tesla’s bitcoin investment was for the long term and that such sales were just an experiment to demonstrate bitcoin’s liquidity and utility as an alternative reserve asset.
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but last week, tesla reported that it sold 75% of its bitcoin in the second quarter of this year for $936 million.
“as with any investment and in accordance with the way we manage fiat-based cash and cash equivalents accounts, we may increase or decrease our holdings of digital assets at any time based on business needs and our vision of the market and environmental conditions”, said the company in a presentation before the sec.
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Digital assets are considered “indefinite-lived intangible assets” under accounting standards. For that reason, Tesla must value your Bitcoin at its lowest point during a quarter and recognize a loss if it falls below its purchase price.
Similarly, Tesla may recognize any gains if it sells its digital assets. The electric vehicle maker posted a $64 million profit on certain BTC-to-fiat currency conversions in the six-month period ending June 30, when the asset price hovered around $19,000.
vetle lunde, an analyst at arcana research, estimates that 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 firm’s bitcoin sale during the financial market downturn shows it was forced to manage risk and raise cash in an environment of rising interest rates, said globalblock analyst Marcus Sotiriou.
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Regardless, Tesla still has the second largest BTC reserve of all public companies, behind Michael Saylor’s data intelligence firm MicroStrategy, which currently holds 129,698 BTC ($2.74B).
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elon musk says tesla sold bitcoin to increase liquidity
Tesla CEO Elon Musk, who has been a vocal proponent of cryptocurrencies, has to some extent held an influential position in the price movement of cryptocurrencies last year through his tweets. Markets were often swayed by his comments and closely watched tesla’s cryptocurrency purchases.
Bitcoin is down 55% year to date and last traded at $21,100 at 1:15am ET. m. on Tuesday, research data from blockworks shows. But the pioneering crypto asset may have reached its macro bottom at around $18,000, according to Varun Kumar, CEO of Hashflow.
“barring exogenous shocks to the macro picture, it seems unlikely to go down,” he told blockworks by email. “That’s not to say it can’t, but cryptocurrencies have led other markets in terms of pricing in an extremely negative global economic outlook.”
“I suspect, then, that much like the 2018 bear market, we will swing sideways and gradually higher until macroeconomic conditions improve. and when that happens, maybe a year from now, we may be headed for another bull run.”
musk said on an earnings call last week that tesla is open to buying bitcoin in the future. “It’s just that we were concerned about the overall liquidity of the company, given the COVID shutdowns in China,” he added, noting that his company did not sell any of its dogecoin.
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