Tesla sold 75% of its BTC holdings in Q2; what does this mean for BTC?
Tesla's Bitcoin sell-off sparks a debate in the crypto world. Is China really to be blamed?
By Shashank Bhardwaj
On Wednesday, Tesla said in its second-quarter earnings statement that it had sold three-quarters of its Bitcoin holdings. Tesla invested $1.5 billion in Bitcoin early last year, banking on the digital currency's 'long-term potential,' according to the electric car maker.
Tesla stated in its quarterly report, "As of the end of Q2, we have converted approximately 75 percent of our Bitcoin purchases into fiat currency. Conversions in Q2 added $936 million of cash to our balance sheet.” At the start of Q2, Tesla held approximately 42,000 BTC and sold most of its Bitcoin holdings at an average price of $29,000.
Tesla also noted that its profitability had been hit due to its Bitcoin holdings ever since the market crash in the second quarter, though it’s unclear exactly how much money the company lost. 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. He stated that Tesla is 'certainly open to increasing its Bitcoin holdings in the future.' He further added that the firm had not reduced its Dogecoin holdings.
For Tesla, the fair market value of its Bitcoin holdings reached $2.48 billion in the first quarter of 2021 and remained around $2 billion at the end of the year. The company did not specify the price at which it sold or the size of its impairment. But Bitcoin began the second quarter near $46,000 and ended below $19,000.
Given the selloff, Barclays analyst Brian Johnson estimated earlier this week that Tesla would incur a $460 million Bitcoin-related impairment loss. There's also debate over whether Tesla's Bitcoin sale was motivated by a need to maintain cash flow or if it reflected waning faith in Bitcoin and crypto, in general.
Bitcoin recovered from a brief sell-off late Wednesday caused by news of Tesla selling its Bitcoin holdings. Bitcoin has been recovering along with the stock market this week as investors are becoming more confident in the ability of the United States Federal Reserve to rein in decades of high inflation.
According to Markus Thielen, chief investment officer at Singapore-based digital asset manager IDEG, Tesla likely sold off its Bitcoin holdings because it was viewed as a 'distraction from their core business.’ Finder's share trading expert Kylie Purcell noted that the electric car manufacturer is not alone in its decision to 'shore up capital in cash currencies.'
Earlier in January, Tesla became one of the largest corporate holders of Bitcoin after purchasing $1.5 billion in BTC. The purchase was disclosed in a February filing with the Securities and Exchange Commission. Tesla had plans to accept BTC payments at the time, but those plans were later scrapped due to concerns about Bitcoin's energy consumption.
Shashank is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash