- Tesla has sold off 75% of its bitcoin assets.
- The electric vehicle manufacturer invested $1.5 billion in bitcoin in the first quarter of 2017.
- In the last four months, the price of bitcoin has lost half of its value.
- Tesla’s sales increased its cash position by $936 million.
Early last year, Tesla invested $1.5 billion in bitcoin, betting on the digital currency’s “long-term potential,” as described by the electric vehicle manufacturer. The business has already sold off three-quarters of its assets.
“As of the end of Q2, we have converted approximately 75% of our Bitcoin purchases into fiat currency,” Tesla said in its second-quarter earnings statement on Wednesday. The corporation reported that these sales increased its cash position by $936 million.
It’s a swift turnaround for Tesla and CEO Elon Musk, who frequently tweeted about various digital currencies during last year’s cryptocurrency boom. In the previous four months, the price of bitcoin has lost half of its value, resulting in a “crypto winter.”
The fair market value of Tesla’s bitcoin holdings hit $2.48 billion in the first quarter of 2021 and was approximately $2 billion by the end of the year. Bitcoin began the second quarter above $46,000 and ended below $19,000, but the company did not disclose the price at which it sold its holdings or the magnitude of its impairment.
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Given the selloff, Barclays analyst Brian Johnson predicted earlier this week that Tesla would incur a $460 million impairment attributable to bitcoin.
“The reason we sold a bunch of our bitcoin holdings was that we were uncertain as to when the Covid lockdowns in China would alleviate so it was important for us to maximize our cash position,” Musk said in an earnings call on Wednesday. “This should be not taken as some verdict on bitcoin,” he said, adding that Tesla is open to increasing its crypto holdings in the future
Nonetheless, when challenged on the results call about bitcoin’s potential as an inflationary hedge, Musk stated that Tesla’s primary objective is to expedite the transition to sustainable energy and referred to bitcoin as “a sideshow to a sideshow.”
When Tesla went all-in on bitcoin in the first quarter of 2021, the business cited the need to become more flexible, diversify its cash holdings, and generate returns on its cash reserves. As the currency appreciated, the corporation rapidly liquidated 10 percent of its holdings, contributing $101 million to the period’s profit.
Kirkhorn stated at the time that the company’s goal was “to hold what we have for the long term and continue to accumulate Bitcoin from our customers’ transactions as they purchase vehicles.”
