Tesla sold 75% of its bitcoins in the second quarter of the year. Fearing that confinements in China would penalize its financial results, Elon Musk’s group was forced to quickly free up cash.
During the second quarter of 2022, Tesla sold $936 million worth of Bitcoini.e. 75% of its reserve. The information appeared in the automotive group’s latest financial report.
” To date, at the end of the second quarter (of 2022), we have converted approximately 75% of our bitcoin purchases into fiat currency says Tesla in the report.
In his last call with investors, Elon Musk clarifies that Tesla has sold its cryptocurrencies to an average price of $29,000. It is likely that the massive sell-off contributed to the erosion of the Bitcoin price.
Since the beginning of June 2022, Bitcoin has indeed been on the decline. After flirting with $70,000 last year, the queen of cryptocurrencies briefly returned under $20,000. The currency dragged most cryptocurrencies down with it, causing many key players in the ecosystem to collapse. Despite Tesla’s announcement, the price of King Bitcoin has stabilized around $23,000 at the time of this writing.
For the record, Tesla invested $1.5 billion in Bitcoin in February 2021, in the midst of a bull market. In the process, the group offered Americans to buy its electric cars with cryptocurrencies. Pointing to the electricity consumption of mining, Tesla quickly gave up payments in Bitcoin. Musk, however, pledged to reverse his decision as soon as miners massively turn to renewable energy.
This is not the first time that the group has sold some of its bitcoins. In March 2021, Tesla raised $128 million from selling cryptocurrency in a “ liquidity test.
On the same topic: Elon Musk drives the price of this cryptocurrency up despite the market crash
Elon Musk reveals why Tesla parted with 75% of its bitcoins
Elon Musk mentioned the resale of bitcoins during his call with investors. The billionaire assures that Tesla had a great need for cash at a time when the global economy is in decline.
” The reason why we sold a large part of our bitcoins was that we didn’t know when the Covid-related lockdowns in spine would be relaxed. So it was important for us to maximize our cash given the uncertainty around the lockdown in China. “, explains Elon Musk.
During the second half of the year, the Chinese authorities decreed a series of confinements to stem the resurgence of coronavirus cases. These measures have penalized many production plants, including Tesla’s infrastructure. The Shanghai Gigafactory was also forced to cease its activities for several days. Subsequently, the factory implemented a closed circuit system to restart production. Concretely, the workers were forced to sleep, eat and live in the factory.
Despite these measures, the production of electric cars remained much lower than expected. Suspended from the decisions of the Chinese government, Tesla feared that the confinements would penalize its financial results. This is why the company has freed up cash by reselling its cryptocurrencies.
Tesla could buy Bitcoin, says Elon Musk
On the other hand, Tesla did not sell part of its Dogecoin to recover liquidity, underlines Elon Musk. Note that the American group has never converted part of its cash into Doge. Tesla is content to recover the Dogecoin paid by buyers of its online store. Since last year, the firm accepts payments in Doge for the purchase of certain accessories. The currency is also expected to be accepted at Superchargers, Tesla’s electric car charging stations.
The founder of Tesla assures that the decision has nothing to do with the possibilities offered by Bitcoin. Elon Musk also specifies that we should not “see any verdict on Bitcoin”. Convinced by the future of cryptocurrency, he even says to himself open to the idea of Tesla buying back Bitcoin in the future. Nevertheless, Elon Musk is very unenthusiastic when discussing the subject. During the call, he recalled that Tesla is not focused on cryptocurrency, but on “the advent of sustainable energy”.
“Cryptocurrency is not something we think about a lot”tempers Elon Musk.
According to some financial experts, it is possible that Tesla will end up sell off the rest of your bitcoins in the future. For Markus Thielen, investment director of the Singaporean firm IDEG, the group will continue to trim its BTC holdings as the price stabilizes on the rise. He even believes that Tesla now views this investment as ” a distraction ” of its main activity.
The reversal of Elon Musk, who had pledged that Tesla would never part with his bitcoins, provoked a wave of panic among investors. In a bearish backdrop, many crypto-asset holders fear that other companies will spin off their Bitcoin holdings. Massive resales could pull the valuation of cryptocurrencies down.
Tesla’s announcement notably revived rumors claiming that MicroStrategythe software publisher that owns more than 129,000 bitcoincould sell part of its reserves. Under the leadership of its CEO Michael Saylor, the company has been investing in Bitcoin regularly since 2020. A blockchain address rumored to belong to MicroStrategy has transferred 132,800 BTC to the exchange. Coinbase. On Twitter, Michael Saylor quickly hinted that no sale was planned.