Bitcoin Makes Tesla Lose Money

The electric car company invested in bitcoin in February of 2021.

As the price of bitcoin continues to fall, the few established corporations that have invested in the currency have begun experiencing losses.

On February 8, 2021, Tesla said that it has invested $1.5 billion in virtual currency and that it will begin accepting it as a means of payment for Tesla automobiles in the following year.

Earlier in the week, CEO Elon Musk had briefly modified his Twitter mini-description to just #bitcoin. The statement was seen as a vote of confidence in the bitcoin market.

Later, the value of one bitcoin soared beyond $42,000.

When it comes to reimbursing its shareholders, Tesla claims that this bitcoin investment would help the company diversify its liquidity sources and increase its flexibility.

After a few months, Tesla said it would no longer accept bitcoin as a mode of payment, effective in May 2021.

It claimed the need to protect the environment as one of its motivations, pointing out that the mining of bitcoins uses a significant amount of power.

In the absence of action, Nature research estimates that by 2024 China's IT miners would emit 130.5 million metric tons of carbon dioxide emissions, approximately equaling Italy's or Saudi Arabia's annual greenhouse-gas emissions.

When bitcoin price reached an all-time high of $69,044.77 on November 10, Tesla's bitcoin risk paid off. But since then, prices have fallen and are presently around $31,000.

Tesla's original investment is now a loss due to the decline in the value of bitcoin. Indeed, Austin seems to have gone out of business. 

According to Bitcoin Treasuries, Tesla's $1.5 billion purchase of 43,200 bitcoins is now worth $1.35 billion, a loss of $150 million or around 15%.

This is the only established corporation whose bitcoin holdings have fallen into the red. 

It isn't far from losing money when it comes to MicroStrategy (MSTR), which has the most bitcoins on its balance sheet. 

In all, 129,218 bitcoins worth $3.97 billion were acquired at a value of $4.04 billion at the time of their acquisition.

Like the stock market, Bitcoin and other cryptocurrencies are now plagued by concerns about future growth. 

Investors are fleeing riskier assets as the Federal Reserve boosts interest rates to rein in inflationary pressures.