John Paul M. Joaquin Tech 07.21.2022 03:Jul AM EDT

Tesla’s Q2 Earnings Report Reveals It Sold Almost $1 Billion in Bitcoin

Tesla may have sold around three-quarters of its Bitcoin holdings for a profit.

The popular electric vehicle (EV) manufacturer recently announced it has made almost a billion dollars from the selling of its digital assets to avoid a "substantial impairment charge" on its holdings, per CoinDesk.

Despite the selling of its Bitcoin holdings, Tesla was able to make the second quarter of 2022 a successful one, with the company achieving the highest operating margin in the industry and the highest vehicle production month in its history.

Tesla Bitcoin Holdings Sale Details

Tesla mentioned in its earnings report for the second quarter of 2022 that its Bitcoin holdings are creating an impairment for the company's profitability despite various increases and growth in its ASP, vehicle deliveries, and other parts of its business.

Its stock has also acquired a lower compensation expense, further boosting the company's profitability.

The impairment is caused by a "substantial impairment charge" from its Bitcoin holdings due to the declining value of the cryptocurrency compared to when it was bought.

For those unaware, an impairment, as defined by Naira Metrics, is a measurement for the reduction of a cryptocurrency's value opposed to when it was bought.

Additionally, cryptocurrency analyst Brian Johnson at Barclays estimated earlier this week that Tesla would see a $460 million bitcoin-related impairment due to the cryptocurrency's declining value, per a separate Coin Desk report. This value may have convinced Tesla to sell three-quarters of its bitcoin holdings despite its promise to not sell any of them.

You may remember that Tesla opened itself to accepting Bitcoin as a mode of payment during the first quarter of 2021 to make itself more flexible, which created an increase in returns from its cash holdings, per CNBC.

However, in May 2021, Tesla CEO Elon Musk announced on his official Twitter account that the company would not be selling any Bitcoin as it intends to use it for transactions when mining for them utilizes sustainable energy.

This promise follows Musk's announcement that Tesla would no longer accept Bitcoin as a way to purchase Teslas due to the environmental impact its mining causes.

"Cryptocurrency is a good idea on many levels and we believe it has a promising future," Musk wrote. "But this cannot come at great cost to the environment."

Aside from avoiding impairment charges, Musk reasoned that Tesla was forced to sell its Bitcoin holdings because it didn't know when China's COVID lockdowns would be lifted.

Tesla has one factory in China, which is located in the city of Shanghai. However, China's Zero-COVID policy has made production there difficult for the automaker, which was noted in its Q2 earnings report.

Musk then said that its Bitcoin sale should not be taken as some verdict on the cryptocurrency as the company has not sold any of its Dogecoin, another cryptocurrency Musk favored.

Tesla's Bitcoin Selling Effect

Tesla's Bitcoin sale is not good news for the cryptocurrency as it erased any growth it gained during the previous months, according to Bloomberg.

The cryptocurrency's growth increased around 4.2% in trades on July 20 but dropped by around 1.6% into the red following Tesla's announcement.

Bitcoin's growth drop can be considered as part of the ongoing "cyrpto winter," wherein cryptocurrency and NFT values drop due to various factors such as high inflation, rising interest rates, and Russia's conflict with Ukraine, per We Forum.