Tesla reported disappointing earnings, with a nearly 30% decline in stock value and automotive revenue dropping by 20%. Despite this, its cryptocurrency holdings, mainly Bitcoin, now valued at $1.1 billion, were a bright spot. Accounting rule changes will require firms like Tesla to report the fair value of crypto holdings, encouraging wider adoption of Bitcoin by public companies, with many joining the trend in 2025.
Tesla’s recent first-quarter earnings report was, to put it mildly, disappointing. The electric car manufacturer saw its stock plunge nearly 30% in 2023, and its revenue and earnings per share fell short of analysts’ expectations. In fact, automotive revenue dropped a staggering 20% compared to the same time last year. However, crypto investors might find a less-discussed detail of value in Tesla’s latest financial results. The company’s crypto holdings, primarily Bitcoin, are currently valued around $1.1 billion. Remarkably, Tesla owns 11,509 Bitcoins and hasn’t sold any of its stash since 2022.
This substantial valuation of Tesla’s cryptocurrency is tied to some substantial changes in accounting rules, also noteworthy for the wider crypto adoption landscape. The Financial Accounting Standards Board (FASB) issued new guidance at the start of 2023 after investors expressed that outdated rules were misrepresenting digital asset values. Starting December 2024, public companies will need to report the fair value of their crypto assets in each reporting period, a pivotal shift that comes after years of restrictions.
Previously, firms were required to use historical cost accounting to assess their digital assets—an outdated, conservative approach—causing many to undervalue their crypto holdings. If the price of Bitcoin dipped post-purchase, companies would reflect this lower price on their balance sheets, and any recovery in value wouldn’t count unless the asset was sold. For instance, Tesla purchased its Bitcoin in early 2021 for around $30,000 each. But by the end of 2022, the value had plummeted to below $16,000. For multiple quarters, Tesla’s Bitcoin was stuck on its balance sheet at about $184 million despite the price rebound.
With the new rules, however, Tesla’s Bitcoin value soared past $1 billion as of Q4 2024. This change enabled the company to record a $600 million gain on its balance sheet, which was a significant boost to its overall net income of $2.3 billion for that quarter. The relationship between Tesla and Bitcoin is complex, to say the least. In early 2021, after buying Bitcoin, Tesla aimed to accept it as payment. Although that intention was halted due to environmental concerns raised by CEO Elon Musk, the company remains a significant player in the crypto market, ranking as the fifth largest corporate holder of Bitcoin.
In the first quarter of 2025, the use of Bitcoin among public companies surged, with twelve new firms entering the market, bringing the total number to 79. Collectively, these companies now hold about 688,000 Bitcoins, with over 95,000 Bitcoins bought just in the first quarter of this year. One contributing factor for this uptick in corporate interest in Bitcoin is the adaptability offered by the new reporting rules but diversifying portfolios amid inflation concerns also drives this shift. Strategy, a software company with substantial Bitcoin holdings, has experienced a remarkable 200% increase since last May.
Nevertheless, it’s crucial to consider that investing in cryptocurrency carries substantial risk. The new accounting rules will reflect the volatility in asset prices on company balance sheets, and potential tax implications are an ongoing concern. Even if companies are better positioned to flaunt gains due to these reporting changes, significant market dips will inevitably affect all players involved.
In summary, Tesla’s recent earnings weren’t a win for many, but the increase in corporate Bitcoin investments signals a positive trend. Not only did this help Tesla’s income, but it also demonstrates the potential benefits of updated accounting guidelines in the ever-evolving landscape of cryptocurrency.
