Tesla's SEC filing reveals it had about $2 billion worth of Bitcoin in its holdings in 2021 and this is an increase of 33 percent from that of 2020. The carrying value of the currency was $1.26 billion and the market value was $1.99 billion.
At the beginning of 2021, the electric carmaker bought $.15 million worth of the crypto coin and sold a portion of it to make a profit in March 2021.
The company reported impairment charges amid drawdowns in the Bitcoin prices and the year ended with impairment charges of $101 million.
Tesla is one of the few companies to have cryptocurrency on the balance sheet. Its website accepts Bitcoin in the sales of certain products. CEO Elon Musk has always been bullish on the crypto asset, which touched a new price height during the pandemic. In April 2021, the Bitcoin price jumped to a high of about $68,000 and the company sold a part of its holdings for $272 million, making a profit of $128 million.
However, a subsequent drawdown in the prices of Bitcoin forced Tesla to record impairment charges of $51 million third quarter and $23 million in the second quarter of 2021. The filing reveals a total of $101 million in impairment charges.
Tesla may report further losses in 2022 as the Bitcoin price has dipped about 50 percent from the highs of 2021 and this was due to investors shedding away the risky assets amid the rise in interest rates.
However, the company is not backing off from the crypto asset bet as its filing states Tesla believes in the long-term potential of Bitcoin as a liquid alternative to cash and investment opportunity. It may increase as well as decrease the Bitcoin holdings based on the market conditions.
The price of Bitcoin on 31 December 2021 was around $48,000 and now it is roughly $42,900. This means the holdings are worth less now. It is simultaneously important to understand that cryptocurrency is highly volatile and at what level the price may jump in the future is not known.
Musk said the company may resume buying Bitcoins when the cryptocurrency gets greener. Tesla discontinued accepting the currency for its merchandise two months after started accepting it. Environmental issues were cited for the reversed decision. However, the company did start accepting Dogecoin for the same purpose.
Bitcoin is the first cryptocurrency and was launched in 2009. Since then, thousands of cryptocurrencies have emerged and filled the segment. Cryptocurrencies are highly volatile and the price movement is unpredictable. During the COVID-19 pandemic years, the prices of most major cryptocurrencies rose to record highs and the financial market dropped significantly and investors moved towards gold and cryptocurrencies.