Tesla invested $1.5 billion in bitcoin early last year, pitching on the digital currency’s “long-term potential,” as per the electric car maker. Three-quarters of the company’s holdings have been sold already.
“As of the end of the second quarter, we had transformed roughly 75% of our Bitcoin purchases into fiat currency,” Tesla stated in its second-quarter earnings report on Wednesday. According to the company, those sales contributed $936 million in cash to its balance sheet.
It’s a swift retreat for Tesla and CEO Elon Musk, who was a big crypto booster last year, tweeting about various digital currencies all the time. During what has been dubbed a “crypto winter,” the price of bitcoin has dropped by half in the last four months.
The fair market value of Tesla’s 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 deterioration, however, bitcoin began the second quarter near $46,000 and ended below $19,000.
Given the selloff, Barclays analyst Brian Johnson assessed earlier this week that Tesla would incur a $460 million bitcoin-related deterioration.
We sold a lot of our bitcoin holdings because we weren’t sure when the Covid lockdowns in China would end, so it was important for us to maximize our cash position, Musk stated amid an earnings call on Wednesday. This should not be interpreted as a verdict on bitcoin, he added, adding that Tesla is willing to increase its crypto holdings in the future.
On the earnings call, Musk, when asked regarding bitcoin’s potential as an inflationary hedge, stated that Tesla’s main aim is to accelerate the transition to sustainable energy, and referred to bitcoin as “a sideshow to a sideshow.”
When Tesla went big on bitcoin in the first quarter of 2021, the company said it was a matter of becoming more flexible, diversifying, and reaping returns on its cash holdings. As the currency rose, the company quickly sold 10%, earning $101 million in profit during the period.
Kirkhorn stated at the time that the company intended to hold what they have for the long term and continue to acquire Bitcoin from transactions from their customers as they buy vehicles.
Musk announced in May of last year that Tesla would no longer accept bitcoin for car purchases due to the environmental impact of mining, but he added that the company “will not be selling any bitcoin.” A week later, he tweeted emojis implying that the company has “diamond hands” when it comes to bitcoin investing, praising “our master of coin.”
