Tesla sold 75% of its Bitcoin holdings worth $936 million in the second quarter

Electric car maker Tesla sold $936 million worth of Bitcoin in the second quarter, or 75% of its holdings, the company announced in its earnings report on Wednesday. The company held only $218 million in Bitcoin at the end of the second quarter, down from $1.26 billion in the first three quarters.

The financial report wrote, "As of the end of the second quarter, Tesla had converted approximately 75% of its purchased Bitcoin into fiat currency, adding $936 million in cash to our balance sheet."

The company held about 42,000 bitcoins during the quarter, so if it sold 75% of them for $936 million, that would equate to an average selling price of about $29,000 per bitcoin. The price of bitcoin was about $18,700 at the end of the second quarter, meaning Tesla avoided a large impairment charge on its bitcoin holdings by selling them earlier in the quarter.

According to a report by Barclays analyst Brian Johnson, Tesla's large holdings of Bitcoin may face an impairment loss of $460 million, but the premise of this figure is that Tesla did not sell or increase its Bitcoin holdings in the second quarter. According to accounting rules for digital assets, if the price of an asset falls within a quarter, the company must report an impairment loss, but if the price rises, it will not be reported as income on the balance sheet unless the asset is sold. By selling Bitcoin, Tesla reduced the impairment charge for holding Bitcoin.

Crypto markets reacted immediately to the news. Bitcoin, which broke through $24,000 on Wednesday, fell sharply by 2.5% to $23,078.18 immediately after the close at 4 p.m. ET, while Ethereum, the second-largest cryptocurrency by market value, also fell by 3%.

Tesla's second-quarter earnings exceeded analyst expectations, with revenue of $16.9 billion, compared with analysts' expectations of $16.88 billion. "While we faced some challenges, including limited production and shutdowns in Shanghai for much of the quarter, we achieved industry-high operating margins of 14.6% and positive free cash flow of $621 million, and ended the quarter with the highest vehicle production month in our history," the company said in a statement.

According to a previous report by Bitpush, Tesla announced in February last year that it had purchased $1.5 billion worth of Bitcoin, a move that caused the price of Bitcoin to soar.

Tesla began accepting Bitcoin payments in March 2021, but stopped accepting Bitcoin as a payment method shortly after May. Musk said in a tweet that the company is "concerned about the rapidly increasing use of fossil fuels in Bitcoin mining and transactions." Musk added that if miners switch to more sustainable energy, they will reconsider Bitcoin as a payment method.

In its first-quarter 2022 report filed in April, Tesla wrote that it believed Bitcoin "has long-term potential as an investment and as a liquid alternative to cash." But it also warned shareholders that price changes tend to affect its profitability, which seemed to be a precursor to Wednesday's announcement.

“During the first quarter of 2021, we recorded an impairment loss of approximately $27 million due to the change in the carrying value of our bitcoin and the $128 million gain we realized from the sale of bitcoin,” the company wrote in an April 25 filing with the U.S. Securities and Exchange Commission.