- In light of Tesla’s $ 1.5 billion Bitcoin investment, the uptrend in the market is extremely hot. Currently, many are predicting that corporate treasuries around the world will follow Tesla’s lead and take a closer look at the allocation for cryptocurrencies.
In light of Tesla’s $ 1.5 billion Bitcoin investment, the uptrend in the market is extremely hot. Currently, many are predicting that corporate treasuries around the world will follow Tesla’s lead and take a closer look at the allocation for cryptocurrencies.
Many corporate companies can follow Tesla and buy Bitcoin
Tesla is the fifth largest company in the S&P 500, and therefore many companies are expected to emulate this move by purchasing BTC.
There is talk of the possibility that the next company to announce a direct Bitcoin purchase is Apple or Microsoft. There is a reason Tesla allocates only 7.7% of its $ 19.4 billion cash reserves to cryptocurrency, according to Caitlin Long, Founder of Avanti.
Why didn’t Tesla buy more Bitcoin?
Digital assets are currently considered as “indefinite duration” intangible assets under current accounting rules. According to Long, any depreciation at fair value below the book value at any point after the purchase will cause Tesla to post an “impairment loss”.
In addition, Tesla will not be able to make any upward revisions in the market price until the sale. This “impairment loss” exposes companies to many negative effects, including sudden hits on their earnings.
Experts do not find it logical for Tesla to purchase a new BTC in the short term for this reason.
The popular crypto supporter said, “Tesla would buy more Bitcoin if the Generally Accepted Accounting Principles (GAAP) were not so ugly.” said.
2/ Why only 7.7% of cash? Well, @Tesla confirmed it's using indefinite intangible accounting, which is UGLY treatment (lower of cost or market+risk of impairment charges). We bitcoiners must work to get bitcoin acctg fixed. It's prob why Square only put 2% of its cash into #BTC. pic.twitter.com/dqO59cquQ4
— Caitlin Long 🔑 (@CaitlinLong_) February 9, 2021
As is currently the case, if any company invests in a Bitcoin Fund, the value will be marked up or down; whereas if he buys bitcoin directly, the value only drops. This could explain why companies prefer indirect exposure to digital assets.
Recently, respected fund manager Bill Miller offered investors to interact with Bitcoin indirectly through the Grayscale Bitcoin Trust (GBTC). A recent SEC file revealed that the Miller Opportunity Trust could invest $ 2.7 billion in GBTC.