Tesla just dumped 75% of their Bitcoin… all because of one accounting rule
You know that point at the end of a rollercoaster where the peaks and troughs start to flatten out?
It looks like we're at that flat point in the Tesla x Bitcoin relationship.
Last January, when Tesla announced they'd be buying $1.5B worth of Bitcoin, the BTC price shot up from around $33K to $43K, and eventually reached ~$63K in April of 2021.
And just like a rollercoaster, that huge rise was met by a big fall in May, when Tesla announced they would no longer be accepting Bitcoin as payment - due to its high energy costs.
The price tumbled from its ~$63K high, to ~$31K in a matter of weeks.
Yikes!
The good news? That correlation between Tesla and Bitcoin may be softening.
Tesla announced yesterday that it had sold 75% of its Bitcoin holdings and, while it's still early days, the BTC price has only dipped 2.5% so far.
Not bad, in comparison!
...but Tesla are profitable - they don't need any cash injections.
So, why are they selling their Bitcoin?
It's all because of 'Bitcoin impairment.'
Which is a roundabout way of them saying:
'If BTC goes below the price we bought it at, we have to mark it down as a loss. But if it goes above that price, we can't report it as a profit. What gives?'
It's a real thing, that all companies holding BTC are subject to.
Generally Accepted Accounting Principles (GAAP) say that Bitcoin appreciation can only be reported once the Bitcoin is sold or exchanged for US dollars.
But Bitcoin losses have to be reported whether or not that exchange takes place.
This makes Bitcoin adoption a big risk for corporations, because their balance sheets often inform their stock price.
And as it currently stands, the balance of risk/reward is being artificially tipped towards risk.
(Something needs to change).
