Bitcoin Devaluation Affects Tesla

Tesla‘s latest earnings report showed that it did not buy or sell bitcoin in the second quarter, but reported a $23 million impairment loss in its digital asset holdings.

The company said that the decline in the value of Bitcoin caused some impact on its quarterly operating income. The electric car company reported a net income of $1.14 billion for the second quarter.

The earnings report showed that total revenue grew 98 percent year-on-year for the second quarter. Revenue increased from $6 billion in 2020 to $11.9 billion this year.

Tesla attributed the bulk of its growth to increased demand for its electric vehicles, saying: We broke new records in the second quarter of 2021. We delivered more than 200,000 vehicles. We crossed $1 billion in net income for the first time in our history.

The company said total revenue was partially offset by growth in operating expenses and a $23 million Bitcoin-related impairment loss.

Given that the company holds bitcoin as an intangible asset, the rules state that the company must report an impairment loss when the price of the asset falls below its cost basis.

However, the company is not required to report the price valuations of the underlying asset until the position is achieved through the sale.

In February, the company announced a $1.5 billion bitcoin purchase, more than its entire quarterly research and development budget.

She said at the time that she might continue to invest in cryptocurrencies. The company indicated at the end of March that its investments amounted to $2.48 billion, based on the increase in the value of the currency in the first quarter.

Bitcoin Devaluation Affects Tesla

The company reported a net gain of $101 million from bitcoin sales during the first quarter, which helped boost its net profit to a record high.

In the company’s statement of operations, this gain is shown as a decrease in operating expenses, indicating that it sold some of its coins as bitcoin prices rose in that quarter.

But the price of Bitcoin fell more than 40 percent in the second quarter. So the value of the company’s currencies is much lower than it was at the end of the first quarter.

The cryptocurrency peaked above $63,000 in the month of April. It then fell to less than $30,000 earlier this month. It is currently trading at approximately $40,000.

Tesla does not consider Bitcoin as a specific market asset, which means that it recognizes the benefits of profits if it is sold to lock in gains.

As a result, the decline in the value of Bitcoin should not affect profits as long as the company does not sell any of its coins.

Tesla’s operating income quadrupled to $1.3 billion from the same period the previous year. Revenue of $11.96 billion exceeded analyst estimates.

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