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After the U.S. stock market closed on Wednesday local time, Tesla announced its second-quarter earnings. The earnings report shows that Tesla sold most of its bitcoin holdings: By the end of the second quarter, Tesla had converted about 75% of the bitcoin it bought into fiat. This conversion added $936 million in cash to Tesla’s balance sheet.
Prior to the sale, Tesla held about 42,000 bitcoins at an average cost of about $30,000 each. If it sold 75% of it for $936 million, that would be equivalent to an average selling price of about $29,000 per bitcoin.
At a price of just under $19,000 at the end of the second quarter, Tesla lost more than $11,000 for every bitcoin it held. Had Tesla not sold bitcoin, it would have faced a $460 million impairment loss on bitcoin by the end of the second quarter.
Tesla said on Wednesday that its bitcoin assets had shrunk to $218 million, and the impairment of bitcoin hurt its profitability in the second quarter, although Tesla did not specify the size of the decline.
Since the beginning of this year, the price of bitcoin has been caught in the quagmire of a bear market. Wind data shows that bitcoin currently ranks second to last in the world’s major asset classes in 2022 with a decline of 51.42% during the year.
The slump in Bitcoin has clearly affected Tesla’s investment returns. In February 2021, Tesla announced that it would buy $1.5 billion in Bitcoin and sell 10% of its Bitcoin holdings in the second quarter of 2021. When the first-quarter 2021 financial report was announced, Tesla made a net profit of $101 million by reducing its 10% position in Bitcoin, successfully turning Tesla’s net profit into positive territory.
As of the second quarter, Tesla has not publicly reduced or increased its Bitcoin holdings. According to public information, Tesla held about 42,000 bitcoins in the second quarter. If it sold 75% of them at a price of $936 million, it would be equivalent to an average price of about $29,000 per bitcoin. This is higher than the current price of Bitcoin. As of press time, Bitcoin’s latest price remained near $20,000.
This means that, according to the calculation rules of the financial report, the price of Bitcoin at the end of the second quarter is about 18,700 US dollars, which is even lower than Tesla’s position cost line. If Tesla does not sell Bitcoin, this quarter’s financial report will record substantial impairment charges. Barclays analyst Brian Johnson had estimated that Tesla would see $460 million in Bitcoin-related impairments given the bear market.
But Tesla is obviously one step ahead of the reduction. Since March 2021, Tesla has invested $1.5 billion in Bitcoin and gained a total of $1.208 billion through selling. At present, there is still some Bitcoin left on Tesla’s balance sheet, but the exact size is unknown.
If this part of Bitcoin is sold for more than 300 million US dollars in the future, Tesla will not “flip the currency and lose money.”
But the impact of Musk’s personal comments on the price of bitcoin is currently waning. After Musk’s latest remarks on Bitcoin, the price of Bitcoin remained volatile and did not fluctuate significantly.
Source: Interface News
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