Experts reveal what Tesla’s $936 million sale means for Bitcoin

by · July 21, 2022

Crypto industry experts are largely unfazed by Tesla’s decision to sell 75% of its Bitcoin (BTC) holdings, saying it’s a fairly typical strategy for companies to improve cash flow during economic downturns.

On Wednesday, the electric car maker revealed that it had sold 75% of its Bitcoin holdings in Q2, adding $936 million in fiat to its balance sheet.

During a conference call, Tesla CEO Elon Musk noted that the sale “should not be taken as a judgment on Bitcoin,” explaining that the move was due to liquidity concerns given the continued COVID-19 shutdowns in China.

“The reason we sold a bunch of our Bitcoin holdings was because we were unsure when the Covid lockdowns in China would ease. So it was important for us to maximize our cash position:”

“We are certainly open to increasing our Bitcoin holdings in the future.”

Asked by investors during the earnings call if he saw Bitcoin as a long-term asset, Musk said the cryptocurrency was a “sideshow to the sideshow” of Tesla’s main goal, which is “to accelerate the advent of stable energy.”

“Cryptocurrency is not something we think about a lot,” he said.

Markus Thielen, chief investment officer at Singapore-based digital asset manager IDEG, told Cointelegraph that Tesla likely sold its Bitcoin because it was “seen as a distraction from their core business:”

“I wouldn’t be surprised if Tesla continues to nibble on Bitcoin when Bitcoin stabilizes, otherwise they would have sold 100%.”

Comparison site Finder’s stock trading expert Kylie Purcell explained that the electric car manufacturer has not been alone in its decision to “support capital in cash”.

“With the world heading into an economic downturn and possibly a recession, it is not uncommon for investors and companies to shift capital away from more volatile assets into fiat currency,” she noted.

She also added that while the price of Bitcoin fell after the announcement, there are already signs of recovery.

On Wednesday, Bitcoin’s price fell by about 2.6% following Tesla’s announcement and has returned to $23,299 at the time of writing – close to its one-month high, which means the crypto community may not have been too worried about the announcement.

The muted reaction to the sale played out differently than last February’s announcement that Telsa had raised $1.5 billion in BTC to add to its balance sheet and planned to accept Bitcoin as payment for certain products (although this was later scrapped) .

The news at the time saw Bitcoin’s price immediately jump nearly $3,000, bringing the cryptocurrency to a new all-time high above $43,000.

Related: Bitcoin Price Falls Below $23,000 After Earnings Report Reveals Tesla Sold 75% Of BTC

Swyftx’s head of strategic partnerships, Tommy Honan, told Cointelegraph that Tesla’s decision to buy Bitcoin last year 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 large institutional investors as well as small and medium-sized companies pouring into the market from that point.”

“Musk said the sell-off was not a judgment on Bitcoin, just a gamble, and it appears the market has taken him at his word. Bitcoin’s price has stabilized over the past 24 hours, and we’d be surprised if other major investors followed suit, especially given the current price of Bitcoin.