Bitcoin price slump cost Tesla $23 million — but the company still managed net profit of $1 billion

According to Tesla’s second-quarter earnings, the company's only crypto purchase remains the $1.5 billion buy in February this year. Out of which, $272 million worth of Bitcoin was cashed out before the end of March.

Time	Value of digital assets
As of 31 March 2021	$1331 million
As of 30 June 2021	$1311 million

Source: Tesla Q2 FY21-22 earnings report

What is impairment cost?

Normally realised losses or gains are only accounted for once Bitcoin is sold, but it doesn’t work that way for companies. Accountants consider Bitcoin to be a ‘collectible’. This means any investments in the cryptocurrency are held at a cost. In Tesla’s case, Bitcoin is held at a cost of $27 million, which it calls 'impairment losses’.

The company also doesn’t follow the ‘end of the quarter’ approach. It takes an impairment any time that Bitcoin’s price falls during the quarter. This means that even if Bitcoin’s price manages to climb back up, Tesla doesn’t just get to mark the value of its holdings back up. And, the only way it can register a gain is by actually selling the Bitcoin it holds.

Tesla has no plans of selling anymore Bitcoin

According to Musk, Tesla does not have any plans to sell Bitcoin in the foreseeable future. This despite the rising concerns over Bitcoin’s impact on the environment. The singular sale was only to show that Bitcoin is a good alternative to cash.

Going forward, the cryptocurrency is being kept in reserve for possible transactions — even though the company decided to suspend the option of letting users buy a Tesla car with Bitcoin in May.


And, ‘future transactions’ may not be too far away. Last week, during the B Work cryptocurrency conference, Musk disclosed that Tesla could be ready to accept Bitcoin payments again if the reports indicating that more than 50% of global Bitcoin mining is being done using sustainable energy hold true to further scrutiny.

He also revealed that it’s not just him and Tesla that have Bitcoin holdings, but also Musk’s other brainchild, SpaceX — even though he did not specify the amount.

For a more in-depth discussion, come on over to Business Insider Cryptosphere — a forum where users can deep dive into all things crypto, engage in interesting discussions and stay ahead of the curve.

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