A case of impairment loss: Tesla, MicroStrategy, and Block are all reeling from sliding BTC prices
Tesla, MicroStrategy, and Block Inc have Bitcoin in their cryptocurrency wallets – the most widely used cryptocurrency in the most unpredictable, “cryptocurrency market.” Despite being aware of the volatility of Bitcoin, these three well-known tech companies have invested extensively in it. It has been suggested that if the price of Bitcoin falls in the incredibly unpredictable cryptocurrency market, these companies could suffer significant losses.
All cryptocurrency investors, including Tesla, Block, and MicroStrategy, could see losses in their wallets as a result of this decline in the price of bitcoin.
According to a July 22 Bloomberg News story, these three firms’ wager on Bitcoin resulted in a total loss of $5 billion in the second quarter.
The estimated losses in Tesla, MicroStrategy, and Block’s bitcoin
Even though these businesses still list Bitcoin as an asset on their balance sheets, their combined unrealized losses now total more than $1 billion. The losses highlight one of the major disadvantages of including a highly erratic asset on a company’s balance sheet, which is usually reserved for more reliable assets like US dollars, real estate, and inventories, among others.
MicroStrategy
As of March 31, 2022, MicroStrategy had about 129,200 BTC tokens listed on its balance sheet. The main objective is to issue debt to finance future Bitcoin purchases with a warning to sell Bitcoin if the business is unable to produce enough cash flow to pay off the debt. The cost of cryptocurrencies was less than MicroStrategy’s typical purchasing price of US$30,700. The sharp decline in the price of Bitcoin may have a significant impact on MicroStrategy’s decision to purchase more Bitcoin for its cryptocurrency wallet. The two main causes are that future debt financing will be challenging for the company and that crypto investors have begun to lose optimism.
MicroStrategy, which paid almost $4 billion to purchase 129,699 Bitcoins, accounts for 70% of the $5 billion loss. The losses incurred by the business intelligence organization are reportedly $3.4 billion. That hasn’t stopped the business or its CEO, Michael Saylor, from holding BTC, though.
Bitcoin Owned: 129,699 as of June 28, 2022
Average Cost: $30,650
Estimated Loss: $1.1 billion
Tesla
Tesla is well known for allowing customers to purchase using Bitcoin. Tesla lost US$101 million on one of its riskier investments involving Bitcoin. For Tesla and other cryptocurrency investors who are anxiously anticipating driving money into their crypto wallets, the cryptocurrency has faced its lowest ebb. Tesla must understand that the cryptocurrency market is just slightly over its cost basis, which may have an impact on its Bitcoin-related business. Elon Musk will keep investing in Bitcoin with Tesla even if the market price of cryptocurrencies falls sharply.
On July 20, Tesla said that it had sold $736 million worth of its Bitcoin assets, at an average transaction price of $29,714 per BTC. In the meantime, Tesla disclosed that its profitability had been impacted by its Bitcoin impairment loss. Elon Musk intimated that the electric car manufacturer is still willing to purchase more Bitcoin in the future despite the loss and that the company’s selling should not be interpreted as a “verdict” on the commodity.
Estimated Bitcoin Owned: 43,000
Average Cost: $31,620
Estimated Losses: $399.8 million
Block Inc
In premarket trading on Friday, shares of Jack Dorsey-led Block Inc, a digital payments startup that has made a significant bet on bitcoin, fell by roughly 7% after the business revealed a loss in quarterly profits due to dwindling interest in cryptocurrencies.
Also, ET corporation, which is situated in San Francisco, California, had lost approximately $3.5 billion in market value. This year, the stock has decreased by more than 44%. Block announced Thursday that it has halted hiring and would lower its 2022 investment objective by $250 million. Block recorded a loss of 36 cents per share in the second quarter, compared to a profit of 40% last year.
On March 31, Block Inc., a company run by Jack Dorsey, possessed $336 million in Bitcoin. According to Coingecko data, the stockpile is currently valued at about $190 million, representing a loss of $146 million for the second quarter.
The fact that Dorsey has continued to promote Bitcoin doesn’t seem to have deterred him in the least. The creator of Twitter recently teamed up with Jay Z to launch a learning initiative called Bitcoin Academy to increase interest in cryptocurrencies in underserved areas.
Estimated Bitcoin Owned: 8,027
Average Cost: $27,407
Estimated Losses: $42.6 million
Is Bitcoin Expected To Rise – Bitcoin Price Prediction
There is no guarantee that Bitcoin will ever return to its November high of about $68,000, even though it has slightly recovered from its low last month of under $18,000.
In June, the price of bitcoin plummeted below $20,000, to $18,000. Since then, Bitcoin has maintained above $20,000 and appears to be rather stable. The prior assistance, $30,000, didn’t last forever, though. It last fell below the $30,000 threshold in July 2021 as a result of rumors of China’s crackdowns on cryptocurrency mining and trade.
The financial market situation has an impact on the price of bitcoin. It’s not conceivable that Bitcoin will cross the $100,000 threshold once interest rate hikes are through, the war in Ukraine has concluded (or at least reduced), and cryptocurrencies continue to gain widespread acceptance.
However, if $69,000 was the top, it might be a long way back down. Following bull markets, Bitcoin and other cryptocurrencies have a history of experiencing over 80% price declines before eventually reaching new highs. If so, the upcoming year might offer some excellent buying opportunities.
At the time of writing, the price of one bitcoin is US$23,947.56 and the 24-hour trading volume is $17.88 B. BTC has increased by 3.30% during the past day. It is currently 6.78% above and 0.80% below its 7-day all-time high of $23,757.60, respectively.