Bitcoin is often referred to as the digital gold, a digital currency that enjoys a market value that rivals the value of bullion, despite selling for just more than a dollar. Over the last quarter, bitcoin’s price dropped by over $3 billion in value, taking the total loss of market capitalization in the last 12 months to $600 billion. Bitcoin investors blame this decline on the rise of other cryptocurrencies, such as Ethereum, which they see as a direct competitor to bitcoin.
In the first quarter of 2019, Tesla (TSLA) reported a net loss of $562.8 million, or $2.95 a share, compared with a profit of $157.9 million, or $0.52 a share, in the prior-year period. The loss included an after-tax loss of $458.6 million, or $2.65 a share, on revenue of $1.52 billion, compared with $14.7 million, or $0.41 a share, in the prior-year period. Analysts polled by FactSet had estimated a loss of $2.46 a share on revenue of $1.83 billion, on average.
Due to the drop in the price of bitcoin in the second quarter, experts suspect that Tesla will have to report a loss of up to $100 million for the second quarter.
Although the price of bitcoin has recently fallen to levels last seen in January, CNBC economic analyst Kate Rooney stated on July 6. Tesla may face impairment charges, which would require it to report the decline in its stock price in a filing with the U.S. Securities and Exchange Commission (SEC).
She noted that since Tesla announced its $1.5 billion bitcoin purchase in February, observers think the electric car maker may have been underwater by the end of the quarter.
Tesla books the cryptocurrency as an intangible asset, and because of accounting rules, when the value of bitcoin falls below a certain amount, companies must note this on their balance sheet, Rooney said, adding:
Tesla says it will take a write-down if the price of bitcoin falls below the transfer value, or the value at which Tesla bought the bitcoin, at any time after the purchase.
According to the analyst, unnamed sources estimate that the write-off could result in a paper loss of between $25 million and $100 million for Tesla.
However, Rooney added that Tesla also cannot increase the price of the BTC it owns until the position is realized in the form of a sale.
Tesla CEO Elon Musk has become quite a polarizing figure for the crypto community in recent months, with the company’s investment in bitcoin and support for bitcoin payments helping to propel assets to new heights.
However, after Tesla suspended payments in BTC due to concerns about the environmental impact of mining and Musk’s constant promotion of Dogecoin on Twitter, the business tycoon fell out of favor with much of the crypto community.
About 11 hours ago, Reddit user StablecoinsFraud posted a screenshot of a tweet he says Musk deleted after pushing up BTC prices. Elon Musk has removed a post he made last night that sent the price of bitcoin soaring. Someone in his ear? They wrote.