Tesla logged a $101 million impairment loss from bitcoin in 2021 as the cryptocurrency’s value fluctuated

Tesla reported impairment losses of approximately $101 million last fiscal year due to value changes in its bitcoin holdings, according to a regulatory filing filed by the electric vehicle manufacturer on Monday.

The company shared its dealings and information with the most-traded cryptocurrency worldwide in a 10K annual financial performance report filed with the Securities and Exchange Commission.

Tesla stated that in 2021, the company suffered impairment losses of approximately $101,000,000 due to changes in bitcoin’s carrying value and $128 million from certain bitcoin sales.

A company may take an impairment charge if it sees a decrease in the carrying price of a particular asset on its balance sheet.

Tesla claimed that $128 million in profits resulted from the sale of a portion its holdings in March 2021.

In January 2021, the company made a initial investment of $1.5 billion in digital assets. These holdings were worth approximately $500 million more at the end of 2021, Tesla claiming that the fair market value was $1.99billion.

Bitcoin’s value climbed by 60% to $46,000 last year.

According to Monday’s filing, “We believe in long-term potential digital assets both as investments and as liquid alternatives to cash,” according to Monday’s filing. Tesla stated last year that it had revised its investment policy in order to allow for more flexibility and maximize returns on cash that wasn’t required to maintain adequate operating.

Tesla accepted bitcoin for a time last year, but Elon Musk, CEO of Tesla, said that it stopped the practice in May due to environmental concerns “about the rapidly increasing use fossil fuels for bitcoin mining and transactions”. Later, he stated that Tesla would resume crypto payments once mining is more efficient.

Tesla isn’t the only company that has suffered a bitcoin-related impairment. MicroStrategy, a business enterprise software company, logged a $146.6million charge to cover its bitcoin holdings for quarter four of 2021.

Bitcoin’s 2022 price has fallen by 7%, and it traded at $43,000 Tuesday.

Decommissioned Power Plant in Armenia to Host Crypto Mining Farms

The equipment at the Hrazdan TPP has been deemed obsolete and inefficient, producing expensive electricity, and authorities in Armenia have decided to shut down the old power plant in the near future. Its premises and infrastructure, including power lines, water and gas pipelines, will be offered to other, more profitable businesses.

The plan to rent out the old thermal station was approved at a meeting of the Commission for Regulation of Public Services on Wednesday, Sputnik Armenia reported. A company manufacturing refrigeration units has already arranged the transfer of some of its production to the TPP, the news portal revealed.

In another part of the plant, a free economic zone called Ecos has been established and is now open. Entities involved in the extraction of digital currencies will be allowed to set up their crypto farms in this area. A law legalizing crypto mining in Armenia was introduced in 2018.

Even after the Hrazdan TPP is decommissioned, the mining facilities will have access to enough electrical energy. A new thermal power plant with four power generating units, Hrazdan-5, has been built nearby by the Russian giant Gazprom. In November 2021, another TPP was completed by the Italian company Renco and Germany’s Siemens.

With the state-run Yerevan TPP, Armenia now has three modern thermal power stations. The report notes that the electricity they generate is more expensive than the energy produced by hydroelectric power plants and the Armenian nuclear power station west of the capital city.

However, the small nation in the Caucasus exports around 75% of their electricity to neighboring Iran which supplies Armenia with cheap natural gas used for power generation. This cooperation will be expanded after the construction of a new transmission line between Armenia and the Islamic Republic in 2023.

Cryptocurrency mining has been developing in Iran which recognized it as a legal industrial activity in 2019. The sector’s energy needs have also increased and both licensed and illegal miners were blamed for the country’s growing power deficit last year.

In May, then-President Hassan Rouhani announced a temporary ban on crypto mining amid rising demand and insufficient supply of electricity caused by the extraordinarily hot weather and droughts. Tehran lifted the restrictions in September when power consumption decreased with cooler weather but reintroduced them in December to avoid winter blackouts.

Zebedee CTO Sees Bitcoin as Currency of the Metaverses

Nike is selling virtual sneakers in metaverse. NFT-based Axie Infinity has seen play-to-earn gamers buy and sell in-game items almost 11.5 million times. With $3.81 billion in transactions, E-sports, which is the live streaming of video games by people over the internet, is worth $1 billion and attracts 26.6 millions monthly viewers.

Commerce in virtual worlds doesn’t seem to be something that’s going to happen, but it is something that is already here. It’s a new, global, and diverse industry so there isn’t much standardization in terms of transferring value.

According to Andre Neves Chief Technology Officer at Zebedee (a payments infrastructure company that focuses on game developers and, recently, metaverse builders), someone’s going do it.

He said that Bitcoin is the best currency to use for this purpose, in a conversation with Karen Webster from PYMNTS.

It doesn’t need to be as complicated as a metaverse or video game. He said that right now, “we’re currently in a virtual universe and we can chat and stream 8K video quality but we are unable to transact any value in this conversation.”

Neves explains that this is due to the fact that each country has its own currency, and its own laws. “So standardizing money for the global and virtual world is really important. You really need that medium to exchange value, without having to make any foray into foreign currency.

Neves stated that Bitcoin, a digitally native currency (a cryptocurrency), ‘provides this capability regardless of any geographic or real-world constraints. “So, regardless of where you are in the world and where I am, we can transact with the exact same monetary standard. It is very powerful to power virtual and real worlds using the same money. We’re only scratching the surface.

Play to win

One paradox of the current virtual world is its growing diversity, but it is also growing together. Video games have become immersive, interactive environments. The economics are shifting to in-game commerce.

The decade-old practice of playing games for free was replaced by paying for access to an internet community.

Neves stated that they are now moving to play-to-earn (which we like to call it), which allows for a bidirectional flow in value.

He says that this is where Bitcoin’s other aspect comes in handy. Neves explained that each one can be broken into 100 million units, called satoshis. These are ideal for nano-transactions and play-to earn.

He said that the current price of a credit card transaction is 60 cents. According to me, the cheapest app in the app store costs around 90 cents. Once that amount is charged to your credit card, it will be $1.20 due to fees. Traditional finance is not able to pay anything below 60 cents. A gamer who makes hundreds of transactions per day can’t have a limit of 60 cents.

Bitcoin does need some help, however, because transactions are now measured in dollars and tens instead of the fractions that a penny is intended. Zebedee relies on the Lightning Network as a Layer 2 solution. It’s simply stacked on top Bitcoin to handle transactions off-chain. This makes it much faster and more affordable.

Zebedee clients offer free games powered via ads. Instead of accepting them, gamers will be able to earn bitcoin by watching them.

Neves stated that they had flipped the model upside down. The game developer still earns ad revenue but some of it is being returned to players. They’re playing, they’re making – it’s a circular system.

Neves stated that the client’s ad return is up to 40% to 80%.

The new world

There are also metaverses, which have become the Next Big Thing after Mark Zuckerberg changed Facebook’s name from Meta to make it more relevant. They are moving away from being a place where people can get together and interact in a virtual environment to one that allows people to interact both socially and economically. Even though metaverses are still in their infancy and the virtual worlds are much more in construction than they are up and running, this is despite the fact that the virtual worlds are still in the infancy stages.

Neves stated that there is no shortage of payment dynamics, but that the key to this interaction is a different type. Interoperability is the key.

Webster was told by him that Meta/Facebook is one of the biggest players in metaverse. They will each have their own metaverse environment. “But interconnectivity and interoperability is what the true metaverse looks like.”

Neves pointed to the Apple and Google App Stores as an example. He said that “this future metaverse can’t occur if there are a lot of gatekeepers running slightly better virtual worlds.”

He said that interoperability is what’s required. “We need open standards so that every user, game developer or service provider can tap into it and activate all their services into the same open standard.

This, in turn, means that ‘the payment railways are required for many of these worlds interconnect with one another. So, the value that you might have obtained from one game can be used to purchase another, but it can also go down the street at a real-world store because it’s the exact same money that’s being used.

Global Central Bank Gold Holdings Rose to 36,000 Tons in 2021, Increase Attributed to Dollar’s Decline

As of September 2021, the amount of gold in central bank reserves surpassed 36,000 tonnes for the first time since 1990. The World Gold Council (WGC) says that this 31-year-old increase in central bank gold holdings came after institutions added 4,500 tonnes of precious metal over the last decade.

The WGC attributed the decline of the U.S. Dollar to central banks’ increasing preference for gold in a report. This report describes how the U.S. Federal Reserve’s substantial monetary relaxation has led to an increase in U.S. dollar supply. According to the report, this has led to a sharp decline in the dollar’s value against gold over the past decade.

The report cites Poland as an example of a central bank that is believed to have bought about 100 tonnes of gold in 2019. This supports the idea that central banks are increasingly buying gold. The National Bank of Poland (NBP), which purchased the gold, is quoted as saying that its president Adam Glapinski cites reports that he points out that the precious metal isn’t directly tied to any country’s economy. This allows it to withstand global unrest.

Gold is free from any counterparty risks

Gold is thought to be immune to financial market volatility and free of counterparty risk. According to the report, this is one reason why Hungary increased its gold reserves by over 90 tons.

According to the report, emerging economies’ central banks are also trying to reduce or limit their dependence on the dollar. These central banks also build up their gold reserves to limit the exposure of their economies to depreciating currencies.

Many central banks had preferred to increase their dollar-denominated assets, such as U.S. Treasury securities and proceeds from gold sales, prior to 2009. The report stated that confidence in the U.S. dollar plummeted after the 2008 financial crisis, which saw funds fleeing from US government bonds.

WGC’s September data shows that central banks are using gold again to protect their assets, as WGC’s September data indicates.

Report: Illegal Trades Account for Less Than 3% of Total Bitcoin Transactions

A new study titled “Blockchain Analysis of the Bitcoin Market” has shown that illegal transactions, frauds, and gambling account for only 3% of all onchain Bitcoin trade volume. The study, however, claims that the volume of exchange and trading desk volume – which is mostly speculation – accounts for about 80%.

The National Bureau of Economic Research (NBER), in a report, appears to refute the claim that illegal transactions are the dominant factor in bitcoin trade volumes ( BTC). The authors, Igor Makarov of the London School of Economics, and Antoinette Shoar of the MIT Sloan School of Management explain why earlier studies had likely overestimated the economic value of illegal trading.

The authors cite a 2019 study which concluded that illegal transactions account for more than 46% BTC transactions. According to the authors:

First, Foley et al. Foley et al. (2019) deliberately dropped all exchange-related volume from their calculations because they want to concentrate only on payments for goods or services. This is because trading is the primary activity on the blockchain.

The authors also stated that the Foley study volume estimate is based upon an imputed network illegal clusters. Any cluster that recursively is illegal if it has a majority of transactions with previously identified illegal clusters is illegal.

Bitcoin Volume and Value Drivers

The authors are in agreement that the method is attractive, but they argue that it doesn’t discriminate between real users or short-lived pass through clusters that exist only to obscure tracing.

Makarov, Schoar, and others use a different method than the one used in the 2019 study. They include exchanges, OTC desks (OTC), or trading desk data in computing the non-spurious Bitcoin volumes. Accordingly, their analysis shows that trading desk volume accounts for about 80% of total volume, while other entities account for only a small portion of total volume at the end of 2020.

Although Makarov and Schoar stated in their report they agree with the concern about the pseudonymous nature bitcoin transactions, they insist that it is important to determine the true magnitude of transactions in order to understand the driving forces of bitcoin value.