Tesla selling Bitcoin last year turned out to be a $500 million mistake
The price of Bitcoin (BTC) has grown by more than 50% since Tesla unveiled its approximately $1 billion BTC sale in July 2022. In other words, the Elon Musk-owned electric car maker would have made an additional $500 million if it had waited until day to sell.
Are Tesla’s Bitcoin Trades Profitable?
Tesla infamously dumped nearly $936 million of its total Bitcoin holdings in Q2 2022, which represented 75% of remaining reserves, to secure $64 million in profit. At the time, Bitcoin was trading about 70% lower than its November 2021 all-time high of $69,000.
Initially, Tesla bought $1.5 billion worth of Bitcoin in February 2021 at an average price of $36,000. The company then sold $272 million worth of BTC to boost its Q1 2021 financials by $101 million.
The company has nevertheless held onto its remaining BTC as of Q4 2022 despite the price of Bitcoin sitting in the bear market at around $16,000 at the time. Today, Tesla has 10,725 BTC worth around $330 million, nearly 15% below its February 2021 acquisition value.
In total, Tesla made approximately $165 million in profit from two separate Bitcoin sales. As of April 14, it is sitting on top of an unrealized loss of around $56.6 million on its remaining BTC holdings, while its net profit to date is around $108 million.
Will Tesla dump its remaining BTC holdings?
Interestingly, Tesla’s previous Bitcoin sales came from weaker free cash flows. For example, Q1 2021 BTC sales worth $272 million accounted for nearly 93% of Tesla’s free cash flow in the same quarter.
Similarly, Tesla’s Bitcoin sales in Q2 2022 came as its free cash flows fell 73% compared to the previous quarter. Both sales suggest that Musk relied on Bitcoin as a safe haven during Tesla’s cash crunch phases.
The Tesla CEO explained at the time that the sale was made to “prove the liquidity of Bitcoin as an alternative to keeping cash on a balance sheet.”
Meanwhile, Wall Street analysts estimate that Tesla’s free cash flow in Q1 2023 could be nearly $2 billion, up 40% compared to the previous quarter. This should reduce the chances of Tesla dumping a significant amount of Bitcoin in the short term.
Blade: Bitcoin in Senegal: Why is this African country using BTC?
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
