Tesla made a $1.5 billion investment in Bitcoin in February. This investment may backfire because of the recent price collapse of the cryptocurrency, according to CNBC.
CNBC’s Kate Rooney recently suggested that Tesla may be forced to sell its Bitcoin assets at a loss.
Tesla’s Impact on Bitcoin
Tesla unveiled a $1.5 billion investment in February. The SEC’s regulations require a write-down of the value of any intangible asset, like Bitcoin, if its price decreases below what was paid for it.
The announcement of Tesla’s involvement in the company caused Bitcoin to be valued at $38,000. It has subsequently dropped below $31,000, which is now the lowest since Tesla went public. This means the company will have to record an impairment charge on its balance sheet.
Worst of all, because of the preceding investment, Tesla will not be able to mark up the value of its Bitcoin after a rise in value. If and when Tesla chooses to start selling Bitcoin, that can happen.
Bitcoin’s Bearish Last Few Months
Following a new round of governmental crackdowns on cryptocurrency mining companies in China, bitcoin saw a roughly 28 percent difficulty adjustment last Saturday.
Based on the amount of processing power on the network, the bitcoin network dynamically changes the degree of difficulty required to discover a new block every two weeks, or 2016 blocks, so that new blocks are added on average every 10 minutes.
In the short term, surviving miners, particularly those outside of China, stand to benefit more, although the market is showing indications of stagnation.
As of 6:50 a.m. ET, Bitcoin is trying to break out of the $34,000 area, trading around $34,618. Bitcoin’s price has remained range-bound between $33,197 and $35,909 for the past five days, according to Coinbase statistics, with a five-day movement of +2.4 percent.
In addition, Ethereum has recently taken some of Bitcoin’s shine. Last Friday, the number of active addresses on Ether’s network surpassed that of bitcoin, indicating that demand for the world’s largest cryptocurrency is waning as its rival grows in prominence.
According to Bitinfocharts, Ethereum has 757,859 active addresses, which is approximately 49,154 higher than bitcoin, which has 708,705. From a high of 1.1 million in April, the total number of active addresses on the bitcoin network has fallen by 38%.