- A filing confirmed that Tesla had seen its holdings of bitcoin drop to $1.8 billion in value.
- The company took an impairment cost of $204 million and converted $64 million of the cryptocurrency into fiat currency.
- CEO Elon Musk labeled bitcoin as a “sideshow” and distanced himself from the asset.
Tesla’s holdings of bitcoin have seen a significant decline in value, with a regulatory filing showing the cryptocurrency had dropped by almost $1.8 billion in 2021.
The “fair market value” of the digital assets decreased from $1.99 billion in 2021 to $191 million a year later, representing a 90% dip. Tesla had announced in 2021 that customers could purchase their electric cars using bitcoin, and the company invested $1.5 billion into the cryptocurrency during the first quarter of 2021.
However, the hope of a bullish rally by 2021 was soon dashed as prices peaked and then started to decline, with inflation and higher interest rates diminishing the appeal of riskier assets like bitcoin. Furthermore, the surge in volatility and liquidity issues in the crypto market have had a negative effect.
The value of bitcoin dropped by 65% over the course of the year, ending at $16,548. Tesla had bought the token between $30,000 and $40,000 earlier in 2021.
The process of liquidating its bitcoin holdings was not easy for Tesla, with CEO Elon Musk saying 75% of the cryptocurrency had been sold off in July 2022 during a quarterly earnings call. He claimed the move was due to the need for liquidity and the Chinese government’s COVID-19 lockdowns.
Due to the decrease in bitcoin’s worth, Tesla had to incur an impairment cost of $204 million for its bitcoin holdings in 2022. The decision to convert $64 million of the cryptocurrency into fiat currency resulted in a net non-cash loss of $140 million.
Musk referred to Tesla’s involvement with the asset as a “sideshow” when questioned about its long-term viability and its battle against inflation. He stated that the company was open to growing its crypto position in the future and that liquidation was possible, but this should not be taken as a judgement on bitcoin.
Tesla’s bitcoin position is now likely to look a lot healthier than it did at the end of last year, with the token’s value increasing by more than 40% in 2023, showing a revival of optimism towards riskier assets following the tumultuous 2022.
