Recently, the CEO of Tesla, Elon Musk, announced trimming its Bitcoin stake down to one-fourth. According to a report by Bloomberg, this announcement regarding the bulk selling of BTC for fiat currency has opened a pandora’s box for the accountants and investors.
The company converted around 75% of its BTC holdings into fiat money. This added approximately $963 million to the company’s balance sheet. Even though the CEO revealed that this sale was made solely to maximize the company’s cash position, the price of the top crypto, Bitcoin (BTC), started dipping after the report.
Quick Takes From the Tesla Selling
- According to Tesla’s letter to the shareholders, the sale of Bitcoin added $922 million of fiat money to the company’s balance sheet.
- Bloomberg stated that the company booked a “depreciation, amortization, and impairment’ charge that amounted to $922 million. However, it did not break out the line item.
- Zachary Kirkhorn, the chief financial officer (CFO) of Tesla, told the analysts that after impairment charges offset gains, the company landed a $106 million cost on its profit and loss statement.
- However, Bloomberg also mentioned the unclear stance of Tesla, as the letter to the shareholders of Tesla stated restructuring expenses at $142 million, with no explanation regarding what else is under the ambit of that charge.
- The report also stated that the Financial Accounting Standards Board (FASB) is still in the process of compiling a set of guidelines on digital assets. There would be no disclosure rule for the companies except that they will have to state the cost of Bitcoin holdings and factor in impairment charges.
- The electric car maker revealed the rest of its digital asset holdings were worth $218 million as of June 30.
Effect On The Price Of Bitcoin
At press time, bitcoin’s price traded around the $21,000 mark, down by nearly 4%, on a daily basis.
On the earnings conference call, the CEO, Elon Musk, said that the company sold BTC to maximize its cash due to Covid-related uncertainty. He also mentioned that the sale should not be considered as any ‘verdict on Bitcoin’
However, this clarification from Musk didn’t affect the crypto market’s sentiments much. On Thursday, the top coin was struggling to regain the $23,000 level. Its total market cap dipped below the $450 billion mark. According to Coinmarketcap’s data, the crypto volume of BTC plunged by around 9% to $43.25 billion.
Elon Musk has been a staunch supporter of the concept of digital assets. Even though he has always preferred Dogecoin over Bitcoin, this move of Tesla has significantly hurt the crypto sentiments.
We shouldn’t overlook that crypto has been recorded as the worst-performing asset in 2022. It lost approximately two-thirds of its value peak in November 2021. The total market capitalization of all crypto assets has dipped to around the $1 trillion mark from its glory days of nearly $3.1 trillion.
The co-founder and chief executive officer (CEO) of Unocoin mentioned that we don’t need to be surprised by this. He said that at the end of the day, the sole purpose of the investments is to make additional wealth.
Unocoin CEO further added.