On the 25th of January, Tesla, the famous electric car manufacturer, released its latest earnings report. In this latest report, Tesla revealed that it had neither bought nor sold any Bitcoin in Q4 of 2022, the final quarter. However, in the report, the electric car manufacturer reported $34 million in impairment charges as the value of its Bitcoin, the largest cryptocurrency in the world, holdings, which declined from $218 million to $184 million in the third quarter of 2022.
An impairment charge is basically the reduction of an asset’s value below its carrying amount or the acquisition cost of an asset. In the context of Bitcoin holdings of Tesla, this means that while the company still holds the same amount of BTC on its balance sheet but the market value of these holdings has dropped compared to the previous quarter.
In February 2021, when Tesla revealed a $1.5 billion investment in Bitcoin, the electric car manufacturer joined the ranks of corporations holding Bitcoin. At that time, with this huge investment in Bitcoin, the price of the market-leading cryptocurrency reached new record highs. However, in the same first quarter of 2021, Tesla sold 10% of its Bitcoin holdings to prove the liquidity of Bitcoin as an alternative to carrying cash on a balance sheet. While in the second quarter of 2022, Tesla sold 75% of its Bitcoin holdings, which affected the price of Bitcoin very adversely.
At that time, Tesla’s balance sheet showed sales from digital assets of around $936 million. At that time, Elon Musk, the CEO of the electric car manufacturer, pointed to the need to maximize the company’s cash to justify the sale and uncertainty surrounding Covid lockdowns in China. This huge sell-off left Tesla with 10,725 BTC in its portfolio. While despite all the turmoil in the markets, Tesla continued to hold the stash of Bitcoin in the second half of 2022, which makes Tesla the fifth-largest public company with the leading cryptocurrency on its balance sheet.
