Due to uncertainty about when the lockdown would lift in Shanghai, Musk said Tesla unloaded 75% of its bitcoin holdings to maximize its cash position. “This should not be taken as some verdict of bitcoin,” Musk said in a Wednesday earnings call. “We haven't sold any of our dogecoin.”
Tesla CEO Elon Musk explained in an earnings call that the company had sold 'a bunch' of its Bitcoin due to liquidity concerns prompted by China's COVID lockdowns.
"The reason we sold a bunch of our Bitcoin holdings was that uncertainty as to when the COVID lockdowns in China would alleviate, so it was important for us to maximize our cash position given the uncertainty of the COVID lockdowns in China," Musk said.
Tesla Inc. made waves this week when it announced that it had dumped the bulk of its Bitcoin stash. Selling 75% of its cryptocurrency gave the company a one-time cash infusion, Elon Musk's electric car company said, but the battered value of its remaining Bitcoin also dinged profits.
The automaker run by Elon Musk bet on crypto in early 2021, joining MicroStrategy (MSTR) as one of the few companies to hold Bitcoin in its corporate treasury. Tesla sold out of most of its position in the second quarter of 2022, dumping more than 30,000 Bitcoins or some 75% of its holdings and avoiding major losses.
Tesla cashes out $936 million in Bitcoin, after a year of crypto turbulence. What a difference a year makes. After making big plays in Bitcoin in 2021, Tesla jettisoned $936 million worth of the cryptocurrency in the second quarter of 2022, trimming its Bitcoin holdings by 75%, the company said in new investor filings.
Tesla sold 10% of its holdings essentially to prove liquidity of Bitcoin as an alternative to holding cash on balance sheet. For a number of strategists, Bitcoin and other tokens are purely speculative investments rather than legitimate alternatives to cash.
“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,” Musk said on an earnings call with analysts Wednesday evening. “So it was important for us to maximize our cash position.”
Similarly, Tesla can recognize any gains if it sells its digital assets. The electric-vehicle maker posted a $64 million gain on certain conversions of BTC into fiat currency in the six-month period ending June 30, when the asset's price was around $19,000.
Tesla's February 2021 Bitcoin purchase caused the cryptocurrency to rise in price by more than 25% to $48,000 - a record high at the time.
The largest holder of Bitcoin is believed to be Satoshi Nakamoto, the pseudonymous founder of Bitcoin. Nakamoto is estimated to own approximately 1,000,000 BTC, worth around $27.13 billion.
Tesla announced in an SEC filing Monday that it has bought $1.5 billion worth of bitcoin. The company also said it would start accepting bitcoin as a payment method for its products.
Satoshi Nakamoto (born 5 April 1975) is the name used by the presumed pseudonymous person or persons who developed bitcoin, authored the bitcoin white paper, and created and deployed bitcoin's original reference implementation.
The co-founder of Tesla Inc. revealed on Twitter that he owns only a tiny fraction of one bitcoin token. "I literally own zero cryptocurrency, apart from . 25 BTC that a friend sent me many years ago," Musk confessed.
Through the fourth quarter, the EV leader maintained its Sept. 30 stake in bitcoins -- but their value melted.
Tesla first disclosed in February of last year that it had invested $1.5 billion in Bitcoin, then announced it had sold 10% of its stake two months later. Tesla said Wednesday its digital assets have shrunk to $218 million and that a Bitcoin impairment dragged on profitability in the second quarter.
The company stated that it sold some of the $1.5 billion worth of its bitcoin holdings, contributing $101 million to its profit margin — that's nearly 25% of its total profits. The company disclosed its Bitcoin holdings in February, and according to its earnings update, then sold a good chunk of it.
Tesla sells 75 per cent of its Bitcoin as profits slump in crypto U-turn for Elon Musk.
Although Musk's interest in Ethereum and Bitcoin is valid due to the cryptos' influence and feasibility in the DeFi space, his Dogecoin investment came as a surprise to many. He has even advocated for Dogecoin, a meme currency, which makes him different from other investors who don't pay heed to meme coins.
Tesla was thought to have purchased Bitcoin at about $36,000, the price prevailing when the company announced its investment in February, but the price appears to have been closer to $32,000, based on its first-quarter financial filing.
Before the worst of the Bitcoin declines, Tesla sold about 75% of its holdings, adding almost $1 billion in cash to its balance sheet. Roughly speaking, that means Tesla sold about 31,500 Bitcoins for about $30,000 each. It is a remarkable trade considering where Bitcoin prices ended the quarter.
Backing a currency is done by the currency's issuer to ensure its value. Bitcoin and fiat currencies are not backed by any other asset. Currencies without backing can still maintain or increase in value.
Trading Volume
Trading volumes are an important factor in determining liquidity in the cryptocurrency market. It refers to the total amount of digital assets exchanged on a cryptocurrency exchange over a given period.
Tesla converted 75% of bitcoin purchases to fiat currency in Q2 2022.