Elon Musk’s electric vehicle manufacturing company, Tesla, has reported a significant profit of $600 million from its Bitcoin holdings in the fourth quarter of 2024, following a revision in its accounting rules for digital assets.
By adopting a new accounting treatment for its digital assets, the company has realized a significant gain, materially improving its financial performance and meaningfully increasing its net income.
Regulatory Shift Spurs Tesla’s Bitcoin Windfall
A landmark ruling by the Financial Accounting Standards Board (FASB), effective mid-December 2023, has revolutionized the accounting landscape for corporate entities holding cryptocurrency.
The FASB is the governing body that establishes accounting and reporting standards under U.S. Generally Accepted Accounting Principles (GAAP). Its decision enables companies to reflect their digital assets’ estimated fair market value on their balance sheets.
Before this amendment, corporate firms’ cryptocurrency holdings were subject to a downward valuation adjustment if their value declined during an accounting period. This accounting treatment often results in a mismatch between the reported value of the assets and their actual market worth.
Furthermore, under the previous guidelines, any increase in the value of the holdings could not be formally recognized until the assets were sold, effectively restricting the accuracy of financial reporting.
Under the revised FASB guidelines, Tesla’s Bitcoin holdings yielded a $600 million profit, fueled by a significant valuation increase to $1.076 billion by the end of 2024, compared to $184 million in the previous quarter.
Fueled by the substantial increase in its Bitcoin holdings, the electric vehicle manufacturer announced a GAAP net income of $2.3 billion for Q4. This caps off a successful year with a total net income of $7.1 billion in 2024.
Bitcoin’s Rising Tide Lifts Institutional Boats
Although Tesla’s Q4 report omitted details on its bitcoin holdings, Arkham Intelligence data indicates that the company holds around 11,509 BTC, valued at approximately $1.21 billion, ranking it fourth among publicly traded bitcoin holders like bullish MicroStrategy, Marathon Digital, Digital Galaxy, Semler Scientific, etc.
Recently, MicroStrategy, a business intelligence software company and avid bitcoin enthusiast known for its aggressive bitcoin acquisition strategy, increased its holdings by 10,107 BTC, which were valued at about $1.1 billion at the time of purchase.
The latest tally shows MicroStrategy’s Bitcoin stash has grown to 471,107 BTC, boasting a whopping valuation of about $30.4 billion.
