Tesla Sells 75% of its Bitcoin Holdings Only a Year After Touting ‘Long-Term Potential’

Jack Choros

Content Marketing

Elon Musk’s Tesla, an American multinational automotive and clean energy company, sold 75% of its bitcoin holdings (an investment that assisted in the legitimacy of the most popular digital asset). 

Tesla converted the large portion of its bitcoin holdings into fiat as of the end of June, adding $936 million of fiat to its balance sheet. Musk stated that the company sold due to uncertainty as to when COVID-19 shutdowns would lift in China.

“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 stated in an earnings call on Wednesday. 

Tesla’s bitcoin investment was first made public in February of last year when the company disclosed that it had invested $1.5 billion in bitcoin. Only two months later, the company announced it had sold 10%. Tesla stated that its digital assets have shrunk to $218 million and that a bitcoin impairment dragged on profitability in the second quarter.

Tesla briefly accepted bitcoin for purchases, thanks to Musk’s pro-digital asset stance. This gave the digital asset a lot of legitimacy in the eyes of investors. However, the company later suspended the payment option, citing environmental concerns about its mining processes. 

Head of research at digital asset fund manager, Valkyrie Investments, Josh Olszewicz stated that a rough estimate would place Tesla’s bitcoin sales at around the $30,000 price level, with $218 million in remaining digital assets on its balance sheet.

Olszewicz said: “Strongly bearish market conditions since the beginning of the year as well as the need for cash on the balance sheet likely contributed to this decision. From a treasury management perspective, downside volatility may have been too unattractive to ignore in the near term.” 

Tesla’s second-quarter profit fell 32% from record levels in the first quarter, with the company reporting a $2.26 billion net profit on Wednesday.

What’s Next for Musk and Tesla’s Relationship with Digital Assets

Musk is still positioning himself as pro-digital assets, even going as far as hinting in recent weeks that SpaceX may join Tesla in accepting Dogecoin for merchandise purchases in future. Musk stated during Tesla’s earnings call that it has yet to sell any of its Dogecoin.

When asked about bitcoin’s potential as an inflationary hedge on the earnings call, Musk stated that Tesla’s primary goal is to accelerate the transition to sustainable energy and called Bitcoin “a sideshow to a sideshow.”

“This should not be taken as some verdict on Bitcoin. It’s just that we were concerned about overall liquidity of the company given the COVID shutdowns in China,” Musk said, adding that Tesla could potentially increase its digital asset holdings in the future. 

Bitcoin is currently sitting at $23,000 USD ($30,000 CAD), indicating that this news has yet to affect the digital assets price. However, seeing that Tesla’s holdings of the digital asset were partially why it is legitimized, this could soon change. 

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Written by: Jack Choros 

Writer, content marketing at Netcoins.