Big losses on Bitcoin for Tesla and Microstrategy

Tesla, MicroStrategy, and Block, three of the companies with the largest exposure in Bitcoin, lost about $5 billion on their positions in the second quarter.

Tesla, MicroStrategy and Block record $5 billion losses due to Bitcoin

According to financial news agency Bloomberg, Tesla, MicroStrategy, and Block, reportedly lost about $5 billion in the second quarter from their exposures in Bitcoin, due to the collapse (nearly 60%) of the digital currency’s prices. 

The figure is certainly worrying for all the companies involved, especially for MicroStrategy, which is the world’s largest holder of Bitcoin. Its portfolio has nearly 130,000 BTC, purchased at an average price of about $33,000. 

The loss as of June would be more than $1 billion, but according to some estimates, the net loss could be almost double that. The risk to the company is that it will also have to suffer a margin call on a $200 million loan secured by digital currency.

Tesla, on the other hand, may have already liquidated 75% of its exposure in Bitcoin, which was about $1.5 billion, according to some rumors. Elon Musk’s company recently reportedly sold 32,000 Bitcoin. 

Declines in early 2022 by the queen of crypto resulted in Tesla closing many positions, which reportedly gained about $900 million from the sale of its stake.

Block Inc, the company born from the ashes of Jack Dorsey‘s Square, also reportedly accumulated large losses due to the market crash. According to data released by Dorsey’s company, the company would have about $330 million in Bitcoin in its belly. 

Bitcoin’s declines also affect the stock prices of the three companies’ stocks

The company’s stock is down 53% since the beginning of the year, precisely because of the Bitcoin turmoil. Block recently proposed an innovative new open source system for Bitcoin mining. Jack Dorsey is increasingly bullish on the digital currency, and he certainly does not seem the type to be fazed by the declines of recent months.

Coming back to the losses calculated by Bloomberg, it is denoted how while those for MicroStrategy and Block are only on paper, since the two companies have not reduced their exposure, for Tesla it would be a real loss. Evidently, Elon Musk, who has other plans including the one involved in buying Twitter, is in need of liquidity.

In contrast, MicroStrategy bought more Bitcoin in May and June. 

Jerry Klein, managing director of Treasury Partners, a New York firm that manages the liquidity of some major US companies, said: 

“It’s very risky for companies to purchase Bitcoin, which is an extremely volatile asset, and puts the company’s cash at risk of severe losses”.