Elon Musk's celebrated bet on Bitcoin has taken Tesla's shareholders on a veering, lurching, off-road adventure. In the roughly seven months since the EV-maker made its famous $1.5 billion purchase––praised by Musk as a superior, potentially profit-spinning use of corporate cash––its realized and paper profits soared to over $1.4 billion at Bitcoin's $65,000 peak on April 14, only to virtually disappear at the signature cryptocurrency's recent low of $28,894 in late June.

By the close of Tesla's second quarter on June 30, Bitcoin had rebounded to $35,041. Tesla had shrewdly unloaded 4,600 coins or 10% of its stake in at well over $50,000 the first quarter, booking a gain of $128 million. At the end of Q2, its carrying cost was, and still is, $1.310 billion, or $31,119 per coin. Hence, Tesla was already then harboring a total a total gain of $3,922 per Bitcoin for the trove in its treasury or $164 million, plus the $128 million booked in Q1, for a total "profit" of $292 million.

On the morning of August 23, Bitcoin hit $50,000 for the first time since May 12, then traded down slightly on August 24. However, using August 23's high, the recent surge multiplied the value of Tesla's current stake plus the take from its previous sale by 142%, from $292 million to $707 million. Tesla's now sitting on a pre-tax cash and paper gains on its Bitcoin investment equivalent to two-thirds of its Q2 profits excluding the sale of regulatory credits. That $700-plus million far exceeds any quarterly profit Tesla's ever posted from its bedrock business of selling EVs and batteries.

For stockholders, the rub is that a drop to $25,000 would generate a $257 million loss that Tesla would need to take even if it kept all its coins. (The accounting rules dictate that it cannot book a profit when the price rises above its carrying costs at the end of a quarter, unless it sells the coins at a gain, but must register a loss when the market price, at any time, falls below the purchase price of any batch in the treasury.) At $20,000, where Bitcoin traded in December of 2020, the deficit would reach $467 million. Losses that size would wipe out a big share of Tesla's modest quarterly earnings.

But certainly investors are now aware: Careening through Bitcoin's slippery summits and deep valleys is the essence of riding shotgun with Elon Musk.