Last Updated: 21 July 2022
A year after Tesla bought bitcoin for $1.5 billion with much fanfare, Elon Musk’s car company has already sold 75% of these coins.
Tesla sells 75% of bitcoin reserves
Tesla’s interest in bitcoin was long dismissed by many as an unnecessary distraction and an afterthought for the company. But when a major covid-lockdown in China forced Tesla to close its Shanghai factory within 22 days, they were only too happy to see bitcoin so liquid. In no time, Tesla sold 75% of its bitcoin holdings to replenish its cash reserves.
Elon Musk shared the following during yesterday’s earnings call:
“The reason we sold some of our bitcoin holdings was that we weren’t sure when the covid lockdowns in China would ease, so it was important for us to maximise our cash position.”
No judgement on bitcoin
Despite Musk selling bitcoin, he says this does not depreciate BTC:
“This should not be taken as a judgement on bitcoin. It is simply that we were concerned about the overall liquidity of the company.”
Time will tell if he means this or if he is just saying this to maintain his popularity among bitcoiners.
Bitcoin price unfavourable for Tesla
In the first quarter of 2021, Tesla’s bitcoins were worth $2.48 billion at their highest point (according to Tesla itself). By the end of 2021, it was worth around $2 billion. Unfortunately, the company has not shared the average price at which the bitcoins were sold, nor is it clear how much Tesla lost on them.
What is clear is that the bitcoin’s price at the beginning of the year was almost 48 thousand dollars and that at the time of writing, the value is about half that.
Analyst Brian Johnson of Barclays estimated earlier this week that Tesla would lose 460 million dollars if they actually sold their bitcoins.
Bitcoin is a sideshow
Musk said despite Tesla selling BTC, the company is “certainly open to increasing our bitcoin holdings in the future” and has not sold any of its dogecoin. However, when asked about bitcoin’s potential as a hedge against inflation, Musk said Tesla’s main goal is to accelerate the transition to renewable energy, calling bitcoin “a sideshow to a sideshow.”
Fast cars, fast profits
In the first quarter of 2021, Tesla bought bitcoin for billions of dollars. The goal was to become more flexible, diversify, and make a return on its cash. That return was quickly achieved as Tesla sold 10% when the price rose. Within a few months, they had cashed in a profit of $101 million. But Elon Musk said at the time that this was not about the money but that he wanted to test how liquid Bitcoin is. Right.
In May last year, Musk said Tesla would stop accepting bitcoin for Tesla cars. There was a lot of public pressure because Tesla presents itself as a sustainable company, and the mining of bitcoin actually consumes a lot of energy. Musk responded to this by stating that Tesla will not sell bitcoin but that they will only stop accepting it.
A week later, Musk tweeted that Tesla has diamond hands.
Tesla has 💎 🙌
— Elon Musk (@elonmusk) May 19, 2021