Tesla made a stunning revelation with its SEC filing on Monday, February 7, with the world's leading electric car maker saying that it was holding nearly $2 billion worth of bitcoin at the end of 2021.
Tesla purchased a total of $1.5 billion in bitcoin last year. The cryptocurrency finished 2021 up by nearly 60 percent, with bitcoin trading above $46,000 on December 31. In July, it had slipped to as low as $30,000 after the Chinese government launched a regulatory crackdown on bitcoin. Bitcoin's value rebounded, though, rallying to a record high above $68,000 by early November. The cryptocurrency was trading just below $43,000 on Monday morning.
However, the company does not account for bitcoin as a mark-to-market asset, meaning that it only affects Tesla's earnings when it buys or sells the currency. Therefore, the drop in bitcoin's value should not affect the earnings of Tesla as long as the automaker has not divested any of its cryptocurrency holdings.
Tesla suffered huge impairment losses worth $101 million last year because of its bitcoin investment. The company cited the cryptocurrency's drop in value as the reason in its filing with the SEC. Tesla did realize gains of $128 million after selling a portion of its bitcoin holdings last March.
Even though Tesla gained $27 million in its crypto transactions overall during 2021, the company still recorded this as a negative loss due to restructuring and other expenses. Tesla said in the filing that the carrying value of their digital assets held as of December 31, 2021, was at $1.26 billion, and the fair market value of such digital assets held was placed at $1.99 billion.
Shortly after Tesla changed its investment policy to start adding cryptocurrency and gold to its holding in January of last year, the company decided to officially accept Bitcoin as a payment method to purchase its electric vehicles. Elon Musk posted a tweet on March 24, 2021, confirming this development, saying, "You can now buy a Tesla with Bitcoin."
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The price of Bitcoin surged following Tesla and Musk's announcement, which was also beneficial to them given their vast holding of the cryptocurrency. The Bitcoin option for Tesla buyers did not last long, though, as the company decided to remove it as a mode of payment just a few days later.
Tesla cited concerns over the rapidly increasing use of fossil fuels for Bitcoin mining and transactions as the reason behind the move. This was a concern that many community members of Tesla shared when the company first announced its Bitcoin investment. Many of them were angered by the fact that Tesla did not think about the harm Bitcoin did to the environment in the first place.
Musk said in July, however, that Tesla will 'most likely' resume accepting bitcoin as a form of payment once the mining for the cryptocurrency becomes eco-friendly.
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