Electric vehicle company Tesla, led by Elon Musk, has reported a major financial boost from its Bitcoin ($BTC) holdings.
In its fourth-quarter earnings report for 2024, the company revealed a $600 million gain, thanks to new accounting rules that now allow businesses to record the market value of their digital assets.
This increase in valuation pushed Tesla’s total Bitcoin holdings to approximately $1.08 billion. Previously, under old accounting rules, the company could only record losses if Bitcoin’s price dropped but could not report gains unless the asset was sold.
The new rule, introduced by the Financial Accounting Standards Board (FASB) in December 2024, now allows companies to update the value of their crypto assets each quarter.
According to Bitcoin Treasuries, the company holds about 9,720 $BTC. However, blockchain research firm Arkham Intelligence suggests Tesla’s Bitcoin holdings could be as high as 11,509 $BTC, worth around $1.19 billion.
Despite missing Wall Street’s revenue and profit expectations, Tesla’s stock rose 4% in after-hours trading following the report.
Tesla’s Chief Financial Officer, Vaibhav Taneja, commented on the impact of the new rule, saying, “It’s important to point out that the net income in Q4 was impacted by a $600 million mark-to-market benefit from Bitcoin due to the adoption of a new accounting standard for digital assets”.
Impact of Bitcoin on Tesla’s finances
Tesla’s overall financial results for Q4 2024 were mixed. While the company benefited from its Bitcoin holdings, its core automotive business faced some challenges.
Tesla’s revenue increased by 2% to $25.71 billion, but this was below analysts’ expectations of $27.22 billion. The company’s GAAP income for the quarter stood at $2.3 billion, partly driven by the gains from Bitcoin.
However, Tesla’s earnings per share (EPS) came in at $0.73, missing analysts’ forecast of $0.76. Operating expenses also increased, rising by over 9% from the previous quarter to reach $2.59 billion.
Meanwhile, Tesla’s auto revenue declined by 8% compared to the previous year, showing some weakness in its main business sector.
Despite these challenges, the increase in Bitcoin’s value helped Tesla maintain a strong financial position. The company first invested in Bitcoin in 2021, purchasing 43,200 $BTC.
Over the years, it has sold off some of its holdings, but the remaining Bitcoin still represents a valuable asset on its balance sheet.
New accounting rules on BTC holdings
The new FASB accounting rule, which will officially take effect in 2025, allows companies to update the value of their digital assets based on market prices each quarter.
Before this change, businesses could only record losses if asset values dropped but could not recognise gains unless they sold the assets.
Tesla has taken advantage of this rule early, and as a result, it reported a much higher Bitcoin valuation than in previous quarters.
With the updated reporting method, Tesla’s Bitcoin value jumped from $184 million to $1.08 billion in Q4.
The rule change has also sparked discussions about how other companies holding large amounts of Bitcoin will report their earnings.
MicroStrategy, another major corporate Bitcoin holder, owns 471,107 $BTC. Some experts expect that it will also see a significant increase in reported asset value due to the new accounting standard.
On social media, one X user commented, “What on earth is going to happen when MicroStrategy announces their earnings next week? They have 471,107 Bitcoin and most likely will also take advantage of the new FASB accounting rule”.
The new rule provides a clearer and more accurate way to report digital asset values, making it easier for investors to understand a company’s true financial position.
This could encourage more corporations to invest in cryptocurrencies, knowing that their valuations will be fairly represented.
Bitcoin’s recent surge
Bitcoin’s recent price surge has been influenced by several factors, including optimism over Donald Trump’s second term as US president.
During his election campaign, Trump shifted his stance on cryptocurrencies, promising to make the US a leader in digital assets. Following his victory in November 2024, Bitcoin’s value increased by more than 50%.
In doing so, the coin hit an all-time high of $109,000 in January. However, Bitcoin is currently trading at $105K, up by over 3% daily.
Market analysts from JPMorgan have also studied the connection between Bitcoin and the stock market. Their report found that Bitcoin has the highest correlation with small-cap tech stocks, especially those in the Russell 2000 tech sector. This means that when small tech stocks perform well, Bitcoin often follows a similar pattern.
“This is true with both Bitcoin and altcoins, although the correlation is on average higher with Bitcoin,” JPMorgan analysts stated in their report. “Crypto’s strong connection to smaller tech companies makes sense because both sectors rely on venture capital and technological innovation.”
Tesla’s experience with Bitcoin highlights how cryptocurrency is becoming an increasingly important financial asset for companies.
The new accounting rule will allow businesses to better reflect the true value of their digital assets, making it likely that more firms will consider investing in Bitcoin in the future.
