The electric car company highlights that Bitcoin is a highly liquid but volatile asset. Tesla warns that BTC may cause impairment losses due to a drop in its value.

Tesla told the US Securities and Exchange Commission (SEC) its opinion on Bitcoin (BTC). Elon Musk’s company said it intends to keep the cryptocurrency in its investment portfolio in the long term.

Tesla’s first-quarter earnings and performance prospectus provides that information, according to the SEC’s website.

The electric car company has been one of the most closely related to cryptocurrencies, more precisely Bitcoin. It has even become one of the institutional investors that have most influenced its price, with 43,200 BTC in its treasury.

In January, they made their first investment in BTC for USD 1,500, which they paid to update Tesla’s investment policy. This action plan sought to diversify and maximize returns on cash not required to maintain adequate operating liquidity.

They said that allowed them to invest in reserve assets like cryptocurrencies, gold, and exchange-traded funds (ETFs). From there, they also began to accept Bitcoin as a form of payment for some products, subject to applicable laws.

In April, BTC exceeded USD 64,000 for the first time thanks to Tesla’s multi-million dollar investment and its acceptance of Bitcoin as a form of payment.

Tesla Believes that Bitcoin is a Highly Liquid Asset

In its prospectus, the company states that it liquidated part of its reserves in Bitcoin in April. They sold USD 272 million worth of Bitcoin out of a total holding of USD 2.48 billion worth of BTC.

Tesla thus proved that Bitcoin is highly liquid, for each it insisted on keeping it in its investment portfolio in the long term. However, they warn that the volatility of the asset can be unfavorable when they want to liquidate.

They also point out that they made a net profit of USD 101 million from their cryptocurrency holdings. Tesla clarified that the only crypto asset in which they have invested is precisely the pioneering cryptocurrency.

In May, Musk tweeted that his company would no longer accept BTC as a form of payment. The billionaire businessman claimed that the CO2 emissions generated by Bitcoin mining were damaging the environment. That led the price of the cryptocurrency to plummet below USD 50,000.

However, they did not put the investment aside but reaffirmed that they still had their Bitcoin holdings. Tesla revealed that they kept a USD 1.311 million investment in BTC.

Tesla Unequivocally but Cautiously Supports Bitcoin

In its report to the SEC, Tesla endorses Bitcoin and presents it as a store of value. However, the company remains cautious about the pioneering cryptocurrency, as a drop in its value can cause impairment losses.

Tesla considers Bitcoin an intangible asset with an indefinite life, so a fall in its values would be an impairment loss. However, those are nothing more than the reduction in the recoverable value of a fixed asset.

The company notes that these losses can negatively affect its profitability in periods in which those impairments occur. They say that would be the case, even if the overall market values of Bitcoin rise.

By Alexander Salazar


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