“Mark-to-market gains, Tesla could use its Bitcoin as collateral to unlock liquidity and hedge against market downturns,” said Gadi Chait, an investment manager at Xapo Bank.
Electric vehicle maker Tesla reported a $ 600 million gain from its Bitcoin
BTC’s $97,725 holdings in the fourth quarter of 2024, thanks in part to new accounting rules that allow companies to record the market value of their digital assets. Crypto executives say the new accounting rules unlock new opportunities for companies seeking to access working capital using their digital assets as collateral.
Tesla’s Bitcoin gambit
Tesla’s foray into digital assets began in January 2021 when it acquired $1.5 billion worth of Bitcoin, sparking both praise and criticism from the investment community.
Although the company has since sold off more than 70% of its Bitcoin portfolio, it still holds 11,509 BTC at a current value of $1.1 billion, according to Arkham Intelligence.
Tesla CEO Elon Musk initially claimed that he sold BTC to demonstrate the asset’s liquidity and bolster the company’s balance sheet during periods of uncertainty. However, in doing so, Tesla missed out on billions of dollars in capital gains.
With Bitcoin trading north of $97,000, the company’s initial purchase of 39,474 BTC would be valued at roughly $3.8 billion today.
Tesla was ahead of its time
Tesla’s Bitcoin purchase came three years before new accounting rules made it easier for corporations to hold cryptocurrencies on their balance sheet.
In December 2023, the US Financial Accounting Standards Board (FASB) finalized rules that would allow corporations to reflect crypto assets’ fair value, or estimated market value, on their books.
Previously, the value of crypto assets held on corporate balance sheets would fall if their price declined during an accounting period, and the recorded value could not be increased until the assets were liquidated.
The new FASB rules for crypto assets came into effect in December 2024. As Cointelegraph previously reported, the new accounting rules would greatly benefit corporate Bitcoin treasuries starting in 2025.
“Before 2025, US FASB rules required companies to carry Bitcoin at its lowest historical price — obscuring unrealized gains,” Gadi Chait, investment manager at Xapo Bank, told Cointelegraph. “Under the new guidelines, digital assets can be marked to market, accurately reflecting fair value and dispelling the notion that Bitcoin is a ‘dead asset’ on the books.”
“Essentially, fair accounting rules enable Bitcoin to be treated as an asset in a manner that reflects its market value at any given time. The transparency and predictability of this make it far easier for corporations to hold Bitcoin on their balance sheets,” John Glover, chief investment officer of Ledn, told Cointelegraph in a written statement.
Bitcoin as collateral
The new FASB rules make it easier for companies to hold and report Bitcoin, thereby improving access to working capital backed by their digital asset collateral.
“Rather than selling Bitcoin and triggering taxable events, companies can borrow against their holdings to access working capital while maintaining their Bitcoin position,” Glover said, adding:
“This allows companies to maintain their exposure to Bitcoin’s appreciation while accessing immediate liquidity to invest in stocks, bonds or other financial instruments to generate returns on reserves.”
Glover also said that the approval of spot Bitcoin exchange-traded funds (ETFs) has “legitimized Bitcoin as a treasury asset.”
“BTC holdings typically generate yields in the 3%–4% range, with some corporate treasuries actively lending to crypto firms to meet rising borrowing demand,” he said.
The US spot Bitcoin ETFs have amassed nearly $116 billion in total assets, according to CoinGlass. ARK Invest called the Bitcoin funds the “most successful ETF launch in history.”
Source: Cointelegraph
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