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Elon Musk faces losses on Bitcoin investments

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A representation of the cryptocurrency Bitcoin
A representation of the cryptocurrency Bitcoin

Tesla is facing a loss on its Bitcoin investments after a slump in the cryptocurrency’s price.

Bitcoin fell to a low of $33,046 on Monday and has fallen by more than a fifth in the last week amid global market uncertainty and a slump in technology stocks.

It is now trading at a six month low, and is now trading below the price at which the electric car giant is believed to have placed a $1.5bn (£1.1bn) bet on it around a year ago.

Tesla bought $1.5bn worth of Bitcoin early last year, at an estimated price of around $35,000, in what was seen as a radical accounting experiment and endorsement of the cryptocurrency.

The recent crash now means this would be worth $1.44bn, according to Bitcoin Treasuries, a website that tracks corporate cryptocurrency holdings.

Tesla sold some of its Bitcoin last year, but its remaining holdings are now believed to be worth less than what the company purchased them for.

The company's Bitcoin bet briefly had previously turned negative in July, before the cryptocurrency’s price rose to a record high of $68,991 in November. It has halved in value since then.

Bitcoin has been caught in a global sell-off of risky investments, alongside technology companies, as investors move into safer assets amid predictions of interest rate rises.

Regulators in Russia and the EU have also called for crackdowns on Bitcoin “mining”, the energy intensive process of creating new coins. Last week, the Financial Conduct Authority said it wanted to crack down on misleading cryptocurrency adverts amid fears retail investors are being mis-sold.

Tesla boss Elon Musk said last year that the company had decided to hold a portion of its corporate treasury in Bitcoin because it was a better asset than cash. “When fiat currency has negative real interest, only a fool wouldn't look elsewhere,” he said.

Tesla also briefly accepted Bitcoin as a payment option, but stopped over concerns about the cryptocurrency’s environmental impact. Mr Musk has said the company will accept it again once it is powered by 50pc renewable energy.

Mr Musk’s comments, which are closely followed by online investors, have at times sent Bitcoin’s price swooning.

Other companies to have converted a portion of their cash to Bitcoin include Square, the financial technology company, and Coinbase, the cryptocurrency exchange.

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