The current bearish market in the crypto industry has led to a loss of huge funds. Investors like Tesla are worried because of the decline in the value of coins. But there is still hope of recovery.
Tesla’s Loss in the First Nine Months of 2022
The recent Q3 revenue report by the United States SEC revealed that Tesla invested $1.5 billion into Bitcoin. Out of this amount, the firm is currently losing $170 million. Although, the electric vehicle maker’s loss is shallow compared to their actual profit.
A massive dump caused the loss in the larger cryptocurrency market. This made the price of Bitcoin decline drastically.
Tesla’s CEO said the firm had earlier made a profit of $64 million from Bitcoin investment. The profit was made in the first quarter of this year, thereby leading to a net loss. The total net loss of the firm at the end of the third quarter is $106 million.
Actions taken towards curtailing the loss made the firm convert some of the Bitcoin into fiat money. Tesla revealed that the firm currently holds $218 million worth of Bitcoin in its wallet. Tesla’s CEO, Elon Musk, still plans to purchase more Bitcoin for the firm.
Effects of Tesla Losses on Core the Firm’s Operations
Tesla’s losses did not materially affect its electric car production operations. The firm made this known during its monthly briefing on 24 October 2022. However, the amount of Bitcoin the firm has on its balance sheet cannot be real assets.
Accounting rules didn’t recognize digital assets as real assets, especially during auditing. Therefore, Tesla will need to record impairment charges for any decline in its fair values. However, until a sale, the company does not make any upward modifications to the price.
In terms of tax obligations, losses can be offset against profits to lessen the burden of tax payment. Capital gains are not taxed until the time of sale. Cointelegraph reported that Tesla made this known when filing the Q10.
Tesla sold $936 million worth of Bitcoin, representing 75% of its holdings in Q2 2022. However, the firm did not sell its digital assets in Q1. Their digital assets balance sheet remained unchanged in Q3 despite the Bitcoin Downturn.
Tesla’s CEO, Elom Musk, is famous in the crypto space because of his engagement. He invested in other coins, including meme coins such as Dogecoin and Shiba Inu. Also, his bid towards acquiring Twitter is an opportunity for him to explore the crypto space better than before.