Bitcoin Nears $80,000 Mark, Tesla Holdings Valuation Rebounds Strongly

TradingKey - The recovery in Bitcoin prices has driven a corresponding increase in the valuation of Tesla's BTC holdings, which is expected to repair the unrealized losses on its crypto assets from the first quarter.

On April 23, Bitcoin ( BTC) prices extended their recent rally, at one point approaching the $80,000 mark. This morning, the price of Bitcoin surged nearly 3%, climbing as high as $79,449, its highest level since January this year. As of press time, Bitcoin prices have pulled back slightly, trading at $78,360.

Bitcoin price chart, source: CoinMarketCap

The recovery in Bitcoin prices has had a significant positive impact on the balance sheets of digital asset firms, driving up the valuation of BTC positions and either expanding unrealized gains or narrowing unrealized losses. For Tesla, the rise in Bitcoin prices will result in its valuation being higher than in the first quarter.

According to earnings data released by Tesla on April 22, the company did not sell any Bitcoin in the first quarter and still holds 11,509 BTC, ranking 17th globally in terms of holdings. Although Tesla's BTC position remained unchanged, the drop in the asset's price affected its book valuation. Over the past quarter, as the price of Bitcoin fell from around $90,000 to $68,000, Tesla recorded an after-tax fair value loss of approximately $173 million on its Bitcoin holdings.

Although the significant pullback in Bitcoin prices during Q1 weakened the valuation of Tesla's BTC holdings, the company did not incur an actual loss. In 2021, Tesla spent $1.5 billion to purchase 43,000 BTC at an average cost of approximately $32,000 to $35,000. In 2022, Tesla sold Bitcoin on several occasions to test liquidity and to meet cash flow needs amid the shutdown of its Shanghai factory.

Following several impairment charges and the allocation of residual value, the average accounting book cost of Tesla's Bitcoin remains at $35,000. Based on today's market price of $78,000 per Bitcoin, the current value of Tesla's remaining investment is approximately $898 million, representing an unrealized profit of over 120%.

Under the latest U.S. accounting standards, companies are permitted to measure digital assets at 'fair value,' meaning Tesla does not need to wait until it sells its Bitcoin to recognize gains. Consequently, whether Tesla's Bitcoin holdings show unrealized gains or losses, these are directly reflected in its quarterly 'net income,' directly impacting its earnings per share (EPS) and subsequently its stock price.

At the start of the second quarter (April 1), Bitcoin was priced at approximately $68,000; the price of Bitcoin at the end of the period (June 30) will determine the valuation of Tesla's BTC holdings. Looking ahead, if the price is above $68,000, Tesla's BTC position will turn back into a profit, repairing the drawdown pressure from the end of the first quarter; if it falls below that value, it will mean an expansion of unrealized losses.