Today we’ve learned that Tesla sold bitcoin. Let’s discuss what does this mean for the market and explain why did Tesla sell its Bitcoin holdings?
How much did Tesla sell its bitcoin for?
Experts in the cryptocurrency sector are generally unconcerned with Tesla’s intention to sell 75% of its Bitcoin (BTC) holdings, noting that this is a pretty common tactic used by businesses to increase cash flow amid downturns in the economy.
Tesla bitcoin holdings
The maker of electric vehicles disclosed on Wednesday that it had sold $75% of its Bitcoin holdings in the second quarter, adding $936 million in fiat to its bank sheet.
Why did Tesla sell its Bitcoin holdings?
Elon Musk, the CEO of Tesla, said on a conference call that the sale “should not be viewed as a verdict on Bitcoin,” adding that the decision was motivated by worries over liquidity in light of the ongoing COVID-19 lockdowns 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. We are certainly open to increasing our Bitcoin holdings in the future.”
Musk responded that Bitcoin was a “sideshow to the sideshow” of Tesla’s primary objective, which is “to accelerate the advent of stable energy,” in response to a question from investors on the results call about whether he considered Bitcoin as a long-term asset.
“Cryptocurrency is not something we think of a lot,” he added.
Tesla sold bitcoin because it was “seen as a distraction from their core business,” according to Markus Thielen, chief investment officer at Singapore-based digital asset manager IDEG.
“I would not be surprised if Tesla keeps nibbling in Bitcoin when Bitcoin stabilizes, otherwise they would have sold 100%,” said Thielen.
The move by the electric vehicle manufacturer to “shore up capital in cash currencies” has not been unique, according to Finder’s share trading expert Kylie Purcell.
“With the world heading into an economic slowdown and possibly a recession, it’s not unusual for investors and companies to move capital away from more volatile assets into fiat currency,” she added.
While the revelation caused a drop in the price of Bitcoin, she continued, there are already indications of a rebound.
Following Tesla’s announcement on Wednesday, the price of Bitcoin dropped by about 2.6 percent before rising again to $23,299 at the time of writing, tracking near to its one-month high, indicating that the crypto community may not have been very alarmed by the news.
The transaction received a different response than when Telsa announced in February of last year that it had purchased $1.5 billion in Bitcoin to add to its balance sheet and intended to accept it as payment for some products.
At the time of the news, Bitcoin’s price immediately increased by approximately $3,000, setting a new record above $43,000.
The purchase of Bitcoin by Tesla last year, according to Tommy Honan, head of strategic partnerships at Swyftx, was “as important a moment as you can imagine for digital assets.”
“It almost gave other businesses permission to put crypto on their balance sheets and we saw a lot of big institutional investors, as well as small and mid-cap companies flood into the market from that point,” Honan said. “Musk said the sale wasn’t a verdict on Bitcoin, just a cash play, and it looks like the market has taken him at his word. Bitcoin’s price has stabilized over the last 24 hours and we’d be surprised if other big investors followed suit, especially given the current price of Bitcoin,” he added.
Bitcoin price
At the time of writing a bitcoin is worth $22959,72 according to TradingView.
Did you know that Tesla has managed to earn more than $3 billion in profit in the Q1 2022?
