Here's What Bitcoin's Crash Could Mean For Tesla

Electric vehicle giant Tesla Inc TSLA purchased Bitcoin BTC/USD for the first time in February 2021. Here’s a look at how the $1.5 billion investment has fared for Tesla with Bitcoin crashing.

What Happened: Tesla announced a $1.5 billion purchase of Bitcoin in February 2021. The company announced later that it sold $272 million of the cryptocurrency in the first quarter of 2021, which had a “positive impact" of $101 million on the company’s profitability.

Tesla ended the most recently reported first quarter of 2022 with $1.2 billion of Bitcoin on its balance sheet, in line with the same amount reported at the end of the last fiscal year.

The Bitcoin value reported for the first quarter came as Bitcoin was trading at $46,281 to close out the first quarter and had traded around $47,345 at the end of 2021.

Related Link: Tesla Megapacks Will Soon Be Used To Mine Bitcoin: Here Are The Details 

Why It’s Important: The price of Bitcoin is dropping significantly in the month of June and could have an impact on Tesla’s next quarterly earnings report, which will likely come in late July.

Tesla investor and YouTube host Dave Lee tweeted that Tesla could take an impairment loss for the second quarter. The impairment loss could be $200 million with Bitcoin trading around $25,000, Lee said. Tesla already reported an impairment loss in 2021 on its Bitcoin holdings, which could make the loss lower than Lee expects.

The exact amount of Bitcoin held by Tesla and the cost basis for the cryptocurrency are unknown, but a range can be speculated based on the purchase price and timing.

Bitcoin Magazine has listed the amount of Bitcoin held by Tesla at 42,902 and a cost basis of $34,963.

Lee puts the amount held in the 42,000 range and a cost basis under $30,000.

Bitcoin traded between $29,333 and $37,020 in the month of January 2021, making it likely that Tesla originally purchased between 37,020 to 51,137 Bitcoin.

The value of Tesla’s Bitcoin is likely to be valued at under $1 billion when it reports its next quarterly earnings report with Bitcoin trading at under $30,000.

Tesla was one of the largest companies to put Bitcoin on its balance sheet and the move could be judged by outsiders now as an unwise decision given the $1.5 billion investment is now worth less than it originally was at the time of purchase.

The Bitcoin holdings could become a larger topic than normal when Tesla reports its second-quarter earnings. 

Price Action: On Monday morning at publication, Tesla shares are down 4.43% to $665.86 and Bitcoin is down 16.94% to $23,290.56 at the time of writing.

Photo: mundissima via Shutterstock