Money and Markets

Tesla's billion-dollar bitcoin bet may be under water as crypto crashes

Business Insider US
Tesla CEO Elon Musk has fed the hype around cryptocurrencies. Patrick Pleul/picture alliance via Getty Images
Tesla CEO Elon Musk has fed the hype around cryptocurrencies. Patrick Pleul/picture alliance via Getty Images
  • Cryptocurrencies continued tumbling on Thursday, imperiling Tesla's billion-dollar bitcoin bet. 
  • Tesla bought $1.5 billion of the cryptocurrency in 2021 and held on as it soared to new highs. 
  • Bitcoin has lost over half of its value in recent months and sharply declined over the last week.
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In February 2021, Tesla made waves when it announced a $1.5 billion bitcoin investment, while most corporations wouldn't touch the volatile cryptocurrency with a ten-foot pole. 

But that ten-figure bet may be now under water as the crypto market at large plunges, erasing hundreds of billions in gains that investors have enjoyed as cryptocurrencies soared in recent years. 

The price of bitcoin has plummeted 17% since Sunday, to around $29,000 for one coin as of Thursday morning — or roughly 55% from a November peak near $68,00. The downturn comes amid a similar skid in broader financial markets, leaving investors little room to hide and wait out the storm.

Tesla amassed its bitcoin stake between January and early February 2021, when the currency was trading for anywhere between $29,000 and $40,000. On average, we can estimate that Tesla bought its coins somewhere in the middle, in the mid-$30,000 range. 

And as bitcoin soared through the rest of the year, Tesla made a killing on its crypto bet — on paper — which it justified as a liquid investment that had more upside than holding cash. By March 2021, the electric-car maker said it had offloaded about 10% of its digital assets, pulling in $272 million from the sale. By the end of 2021, the company listed around $2 billion in digital assets on its balance sheet. 

But after months of losses, bitcoin is now worth substantially less than what Tesla likely bought it for.

As of March 31, Tesla said it held $1.26 billion in digital assets. Add that to the $272 million that the company made from previous sales, and you get slightly over $1.5 billion, meaning Tesla was just barely breaking even on its investment before bitcoin tumbled another 30%. 

Still, it's possible the company cashed out its holdings at just the right time. We won't know the true damage, if there is any, until Tesla's next quarterly earnings report.

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