- Tesla’s crypto holdings remain unchanged.
- Crypto assets are undervalued due to accounting practices.
- Tesla’s Dogecoin holdings are unknown.
Tesla released its Q1 2024 financial report on Tuesday, revealing no change to its digital asset holdings, which comprise Bitcoin (BTC) and Dogecoin (DOGE). The electric vehicle maker’s cryptocurrency stash remained at $184 million, reflecting a stance of holding rather than selling its digital assets since the last known disposals in June 2022.
Tesla does not disclose the exact unit holdings of BTC and DOGE on its financial reports. However, the valuation of its crypto assets is recorded at “impaired value” in line with International Accounting Standard 36 (IAS36,) which sets out an often criticized practice of accounting for certain types of assets, including cryptocurrencies.
Accounting Practice Hinders Crypto
Under IAS36, cryptocurrencies like Bitcoin and Dogecoin are treated as intangible assets. This means they are initially recorded on a company’s books at their cost or acquisition price and are subject to periodic impairment testing.
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If a crypto asset is assessed as impaired, such as when its fair value has fallen below the recorded cost, its value in the company’s books must be written down. The other side of this accounting entry is recorded as an expense, reducing the company’s profitability. This is a common scenario given the volatility of crypto prices.
The kicker is that impairment rules are one-sided, meaning that while companies must write down the value of their crypto assets when prices decline, they cannot adjust the carrying value upwards to reflect any subsequent market price increases. The recorded value remains at the lower, impaired valuation.
However, this rule is set to change from December 15, 2024. Under the updated accounting standard, firms can record their cryptocurrency holdings at fair value, reflecting upward and downward market price movements.
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The current impairment rule has tainted corporate acquisition of cryptocurrency as troublesome and risky, deterring some from adding cryptocurrencies to their balance sheet. Observers expect the change to encourage more businesses to invest in digital assets, as gains will soon be recognized on the books.
With the impairment accounting rules set to change, understanding the composition of Tesla’s $184 million cryptocurrency holdings takes on greater significance.
Tesla’s BTC, DOGE Holdings
It’s unclear how Tesla’s $184 million crypto assets are compromised. Tesla first announced buying 43,200 Bitcoin for $1.5 billion in February 2021, to much fanfare. The move was matched with the company enabling customers to buy Tesla cars with BTC, signaling a further nod of approval from the EV maker.
However, the euphoria was short-lived. By May 2021, Tesla had U-turned on accepting BTC for payments, while company CEO Elon Musk expressed major concerns about the environmental damage caused by BTC mining. This incident spun Musk’s status among crypto fans from hero to leper.
Tesla sold 4,320 BTC in Q1 2021 and a further 29,160 BTC in Q2 2022, leaving a remaining balance of 9,720 BTC, which has not changed since. With the lowest price of BTC post-Q2 2022 being around $15,800, back-of-the-envelope calculations suggest the BTC element of Tesla’s crypto holdings is approximately $153.6 million.
The difference of $32.4 million comprises the DOGE component. However, there is no verified information on Tesla’s initial DOGE purchases or sales, making it impossible to approximate the company’s unit holdings of the meme coin.
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