Tesla CEO Elon Musk may have a role to play in dragging the price of Bitcoin down, hence, paving the way for the impairment loss suffered by the firm.
American electric vehicle and clean energy company, Tesla Inc (NASDAQ: TSLA) has posted its second-quarter earnings results in which it revealed a $23 million impairment loss in its Bitcoin holdings. The loss according to the Palo Alto firm caused a visible offset or drag in its operating income which nonetheless grew year on year.
Tesla is one of the major institutions with have a vocal and obvious backing for Bitcoin, a move that was marked by a $1.5 billion purchase of the premier digital currency back in February. The acquisition news was welcome by a 13% growth in the price of BTC, pushing the coin to a new all-time high (ATH) of $44,000 at the time.
Tesla sold off a portion of its Bitcoin holdings at the end of the first quarter to boost its revenue having made a net gain of $101 from the sale of the digital asset. With the upsurge in the price of Bitcoin in the first quarter, the total holdings of the automaker stood at $2.48 billion, pitching the firm as one of the institutional investors with the most profit margin on Bitcoin.
The price of Bitcoin has lost steam beginning in the second quarter, in what appears as profit-taking from both short-term and swing traders was met with a set of concerning fundamentals that pushed prices lower. At present, Bitcoin is changing hands at $37,288.36, down 2.51% in the past 24 hours according to CoinMarketCap. While Tesla is still in profit generally, the firm does not account for Bitcoin as a mark-to-market asset, meaning that the monetary value of the holdings can only be profiled until a sell-off is made.
The $23 million impairment loss recorded is thus based on the premise that the company’s BTC holdings are seen as an inventory asset and using the GAAP provisions, it is its lowest value for the quarter that was factored in the firm’s operating income estimations.
Elon Musk has a Role in the Tesla Bitcoin Impairment Loss
Tesla Chief Executive Officer Elon Musk may have a role to play in dragging the price of Bitcoin down, hence, paving the way for the impairment loss suffered by the firm. Elon Musk championed the criticism of Bitcoin mining’s energy usage, stirring a massive Fear, Uncertainty, and Doubt (FUD) amongst Bitcoin investors across the board.
Per the position, Musk maintained, Tesla chose to halt its plans to accept Bitcoin as payment for its products until there is good progress in the shift towards more sustainable and green energy options. This, coupled with a determined move by China in clamping down on all crypto-related activities has contributed to keeping Bitcoin and altcoin prices below their all-time highs.
While Elon Musk received a tag as both a friend and foe in the crypto ecosystem for price manipulation, he recently unveiled his private venture SpaceX also has a Bitcoin holding and that BTC’s energy usage is improving and Tesla may resume accepting Bitcoin once again.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.