Tesla’s Q2 2022 financial results will be impacted by an estimated $440 million impairment on its Bitcoin holdings, a cryptocurrency that the company invested $1.5 billion into in 2021.
After reaching an all-time high above $64,000 last year, the price of the Bitcoin has fallen to below $20,000 in recent months. With the precipitous drop, the market value has now shrunk to about about $820 million.
The company can report a decline in the value but not an appreciation without making a sale of the crypto. This means the price of Bitcoin can affect how much profit Tesla declares in any quarter, and according to estimates by FXStreet, will result in a $440 million impairment when Tesla posts its Q2 2022 financial results on July 20.
The decline is a big change from Tesla’s position in Q1 2022 when it reported its Bitcoin assets worth $1.26 billion. The actual market value was about $1.96 billion, but accounting practices prevented Tesla from reporting the return on investment until it sold the crypto.
Tesla sold $272 million worth of its bitcoin in Q2 last year, primarily as a way for the company to test the liquidity of its investment.
At the time of the purchase in 2021, Tesla announced it would begin accepting payments in Bitcoin for its vehicles, which it did for a short time, but soon after discarded the idea due to concerns about the environmental impacts of mining the cryptocurrency.
However, Musk has said Tesla would likely accept Bitcoin payments in the future, but it has yet to reappear on the Design Studio or in the Tesla Shop.
This isn’t the first time Tesla has reported an impairment on its Bitcoin holdings. The company recorded approximately $101 million of impairment losses in 2021 resulting from changes to the value of Bitcoin.
Tesla is not alone in losing money through its crypto investment. Other public companies affected by the downtrend include MicroStrategy, Block Inc., and Coinbase.