Tesla Limits Bitcoin Losses

Electric-vehicle maker Tesla and CEO Elon Musk warn of massive hacks affecting the crypto industry.

Tesla  (TSLA) – Get Tesla Inc. Report can smile. 

The manufacturer of premium electric vehicles hasn’t been much affected by the fall in cryptocurrency prices. 

At the beginning of 2021 the group provided a much needed vote of confidence to the young industry, which wants to disrupt the world of finance. 

Indeed, CEO Elon Musk said in February 2021 that the company had invested $1.5 billion in bitcoin. In January the firm had purchased more than 43,200 bitcoins.

The bet quickly paid off as bitcoin’s price soared to a record $69,044.77 on Nov. 10 amid the crypto craze. 

But the collapse of the crypto market, which has lost more than $2 trillion since hitting an all-time high of $3 trillion in November, has rattled most players, even its evangelists. 

Bitcoin has lost more than 72.1% of its value, trading around $19,000 at last check, according to data firm CoinGecko.

Small Net Loss

All of this suggested that Tesla, one of the biggest companies to invest in bitcoin, had lost big. But the company just confirmed that it has been little affected by the fall in prices.

In the first nine months of 2022, “we recorded $170 million of impairment losses resulting from changes to the carrying value of our bitcoin,” Tesla said in a regulatory filing on Oct. 24. The firm gained $64 million “on certain conversions of bitcoin into fiat currency.” Tesla thus lost a net $106 million on the bet.

While the group does not explain how it limited the damage, a clue appeared in the second-quarter results. In July Tesla had indicated that it had sold 75% of the 42,000 bitcoins it held on April 1. 

“We have converted approximately 75% of our bitcoin purchases into fiat currency,” the maker of the Model Y and Model 3 said at the time. The bitcoins left on its balance sheet were valued at just $218 million.

In view of the new figures, the value of its bitcoins did not vary between the end of the second quarter and the end of the third quarter. Bitcoin prices remained almost stable (-0.7%) between June 30 and September 30.

“The prices of digital assets have been in the past and may continue to be highly volatile, including as a result of various associated risks and uncertainties,” the company said in its regulatory filing. 

“For example, the prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable.”

Tesla Warns About Crypto Hacks

It added that “their lack of a physical form, their reliance on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence.”

Tesla touches on a big problem currently affecting the crypto industry. Platform hacks are on the rise. More than $3 billion has been stolen from crypto platforms this year to date.

“October is now the biggest month in the biggest year ever for hacking activity, with more than half the month still to go. So far this month, $718 million has been stolen from #DeFi protocols across 11 different hacks,” blockchain security firm Chainalysis said on Oct. 12.

“At this rate, 2022 will likely surpass 2021 as the biggest year for hacking on record. So far, hackers have grossed over $3 billion across 125 hacks,” it added.

These vulnerabilities worry Tesla.

“As intangible assets without centralized issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions that may result in the loss or destruction of private keys needed to access such assets,” the company warned.

It then concluded: “If such threats are realized or the measures or controls we create or implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be harmed.”

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