Tesla and Bitcoin

Roughly a quarter of Tesla's earnings last quarter were due to recognizing a $600 million gain on Bitcoin. Tesla still came short of expectations.

Tesla reported earnings per share of $1.07 on revenue of $25.8 billion, both of which fell short of Wall Street’s expectations.

However, Tesla also disclosed that it recognized a $600 million gain on its Bitcoin holdings last quarter, which helped boost its bottom line.

Without the Bitcoin gain, Tesla’s net income would have been down 78% year-over-year in Q4 2024. If you remove regulatory credit, it would be down 86%.

Bitcoin saved Tesla’s quarter

Tesla reported net income of $2.3 billion in Q4 2024, which was already down 70% year-over-year.

The automaker also reported other income (expense), net, which changed favorably by $523 million in the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to remeasurement of our bitcoin digital assets to fair value in 2024, partially offset by unfavorable fluctuations in foreign currency exchange rates on our intercompany balances.

A large part of that is due to a $600 million mark-to-market gain on Tesla’s Bitcoin holdings, which are now being valued on Tesla’s balance sheet.

This is enabled by the adoption of ASU 2023-08, which is the latest crypto accounting standard.

Tesla had moved its bitcoins around last quarter, triggering a lot of speculation. We suspected that Tesla might be getting ready to start accepting Bitcoin payments again, but this now appears to be the more likely explanation.

Bitcoin is now a big part of Tesla’s earnings, which is a remarkable development.

If it wasn’t for Bitcoin, Tesla’s net income would be down 78% in Q4 2024 compared to Q4 2023.

If you remove regulatory credit, it would be down 86% and Tesla’s earnings would add up to barely more than $1 billion compared to its more than $1 trillion valuation.

Bitcoin’s value has fluctuated wildly over the last few years, and it’s currently trading at around $40,000.

When Tesla first invested in Bitcoin early in 2021, the cryptocurrency was trading at around $34,000.

At the time, many Tesla community members were excited about the fact that the automaker was finally accepting the cryptocurrency as payment on new vehicles.

However, a few days later, Tesla took a step back with crypto by removing the Bitcoin payment option. The company noted concerns over the energy needs of the Bitcoin network:

Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.

This is a concern that many Tesla community members shared when Tesla first announced its Bitcoin investment, and many were angered by the fact that the company didn’t think about it in the first place.

At the time, Tesla noted that they were not selling their stake in Bitcoin and that they planned to resume taking Bitcoin payments once the network showed a higher mix of renewable energy.

Last year, Tesla made some moves that pointed to starting to take Bitcoin payments again, but it has yet to happen.

A year after the initial investment, Tesla’s Bitcoin holding increased to $2 billion, but the cryptocurrency lost a lot of its value in 2022 and the automaker’s position suffered – though the automaker also divested about 75% of its Bitcoin position during that time.

Tesla reported over $1.2 billion in proceeds from selling Bitcoins, but the automaker still sits on a good amount.