US ‘past peak inflation’ after Tesla sells 90% of Bitcoin

by · August 7, 2022

Bitcoin (BTC) is in short supply at Tesla, even as the CEO predicts that US inflation has already peaked.

Speaking at Tesla’s 2022 annual shareholder meeting on August 5, Elon Musk predicted that a coming recession in the US would only be “mild to moderate”.

Musk on costs: “The trend is down”

Having recently sold almost all of its $1.5 billion BTC holdings, Tesla is seeing the emergence of exactly the kind of financial landscape where risk assets thrive.

During a Q&A session at the annual meeting, Musk revealed that six months of raw material prices for Tesla parts are already getting cheaper, not more expensive.

Commodities, he said, are trending down, giving a hint that inflation has already reached its highest levels.

“We kind of have insight into where the prices are going over time, and the interesting thing we’re seeing now is that most of our items, most of what goes into a Tesla – not all, more than half – the prices are trending down about six months,” he said.

“This can of course change, but the trend is down, which suggests that we are past peak inflation.”

The recovery from an inflationary period with commodities on the way down provides fertile ground for a rise in risky assets, including crypto. Theoretically, this comes as a result of lower inflation, which means less tightening by the Federal Reserve, and provides favorable conditions for risk investments.

Should strength return to the markets and crypto outperform, the trend will be ironic for Tesla, which sold off virtually all of its BTC exposure – with a profit of just $64 million – last month.

At the time, Musk added that BTC could return to the firm’s balance sheet at a later date, and that the decision was not a comment on Bitcoin per se.

The annual meeting, meanwhile, offered further upbeat macro predictions, including a potential US recession that is “relatively mild” and lasts about eighteen months. Inflation, Musk added, will “decline rapidly.”

A run higher in the second half of 2022

The irony in Musk’s comments was not lost on crypto commentators, and other voices are already betting that a rise in stocks is here to stay.

Related: Bitcoin price: weekend volatility ‘expected’ with $22K level to hold

Among them is Fundstrat Global Advisors, which noted this week that markets have historically bottomed out a year and a half before the Fed stops tightening via rate hikes.

The second half of 2022, the firm predicted, could take the S&P 500 to 4,800 points — a boon for crypto markets that remain highly correlated with movements in stocks in general.

As Cointelegraph reported, further insight into Bitcoin’s potential comeback came from the world’s largest asset manager this week. BlackRock, with over $9 trillion in assets, has partnered with US exchange Coinbase to bring crypto exposure to clients.

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