Bitcoin 'long-term Potential' Sold Off 75% Of Tesla's Bitcoin Holdings

Tesla CEO Elon Musk: Company Dumped 75% Of Its Bitcoin Holdings After Touting Its ‘long-term Potential’ A Year Ago.

KEY POINTS

  1. According to Tesla’s second-quarter earnings report, “approximately 75% of our Bitcoin purchases have been converted into fiat currency and will be retained by us.”
  2. A total of $1.5 billion was invested by the company in bitcoin early last year.
  3. The value of the digital currency has plummeted in value this year after a huge rally in 2021.

Tesla CEO Elon Musk: Company Dumped 75% Of Its Bitcoin Holdings After Touting Its ‘long-term Potential’ A Year Ago

There has been a significant rise in the price of bitcoin in the last few months as a result of the electric car maker investing $1.5 billion in bitcoin, banking on what it called the digital money’s “long-term potential.” Tesla has already sold three-quarters of its holdings.

According to Tesla’s earnings statement for the second quarter, released on Wednesday, it had converted approximately 75% of its Bitcoin purchases into fiat currency by the end of Q2. These sales contributed $936 million in cash to the balance sheet of the company, which was the result of those sales.

Tesla CEO Elon Musk: Company Dumped 75% Of Its Bitcoin Holdings After Touting Its 'long-term Potential' A Year Ago - Share Market Daily
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Throughout last year’s runup to the end of the year, Elon Musk, Tesla’s CEO, tweeted about numerous cryptocurrencies and was a heavy crypto booster, which triggered a rapid retreat for the company.

During what’s been dubbed a “crypto winter,” bitcoin has lost half its value in the past four months, which has led to its price plummeting.

During the first quarter of 2021, Tesla amassed an estimated $2.48 billion in fair market value for its bitcoin holdings, and by the end of the year, it had reached approximately $2 billion.

Bitcoin started the second quarter at close to $46,000, and by the end of the quarter had dropped to under $19,000, while the company did not disclose at what price it sold or what the impairments were.

As a result of the bitcoin selloff earlier this week, an analyst at Barclays estimated that Tesla would have an impairment of $460 million associated with its bitcoin holdings.

During an earnings call on Wednesday, Musk explained the reason why he sold a large chunk of bitcoin holdings is that he was uncertain when the Chinese government lockdowns on cryptocurrency would end, so it was imperative that he maximize his cash position as soon as possible.

It should not be construed as some kind of verdict on bitcoin,” he said, adding that Tesla is open to increasing its crypto holdings in the future if the market develops further.

Tesla’s top concern is accelerating the transition to sustainable energy, and Musk, when asked about bitcoin’s potential as an inflationary hedge, called bitcoin “a sideshow to a sideshow,” referring to it as a sideshow within a sideshow during the earnings call.

After Tesla went big on bitcoin in the first quarter of 2021, when the company announced that it would be diversifying its cash holdings and picking up returns from its cash assets, the company said it was a matter of getting more flexible, diversifying, and reaping the benefits.

As the currency ran up during that time period, the company quickly sold 10%, contributing $101 million of profit to the company during that period.

It was Kirkhorn’s intent at the time to hold what the company had for a long time, and for the company to continue to accumulate Bitcoin as customers purchase their vehicles from us in the future.

Earlier this year, Musk announced the company would no longer accept bitcoin for the purchase of cars because of the detrimental impact mining has on the environment.

However, he added that the company would not be selling any bitcoin in the near future. A week later, Musk tweeted emojis indicating the company had “diamond hands” when it comes to bitcoin investing and credited “our master of coins.”.

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