Elon Intrudes Bitcoin Rally by Selling 75% of Tesla's BTC Holdings

Tesla Inc has trimmed its Bitcoin stake by one-fourth, the renowned electric car manufacturer disclosed in its earnings for the quarter ended June 2022.

Elon Musk-owned electric vehicle-making company Tesla has sold a significant amount of its Bitcoin holdings, the firm said in a statement. Reporting its earnings for Q2, the company said that it had sold 75 percent of its Bitcoin holdings, an investment that helped the world’s now-largest cryptocurrency by market cap, to achieve that position and surge rapidly in terms of value. The price of bitcoin fell about 1.7% to US$23,300 immediately following the release of the earnings report but rebounded to its previous levels after Musk made his comments on the earnings call. “As of the end of Q2, we have converted approximately 75 percent of our Bitcoin purchases into fiat currency,” said Tesla in a shareholder letter on Wednesday, as part of its company earnings report. “Conversions in Q2 added US$936M of cash to our balance sheet,” it said. Tesla ended the second quarter with just US$218 million in bitcoin (BTC), down from US$1.26 billion in the previous three quarters. The automobile major February 2021, announced that it had invested about $1.5 billion in Bitcoin but subsequently sold 10 percent of its stake in April, just two months later.

The company held about 42,000 bitcoin heading into the quarter. Bitcoin ended the second quarter at a price of about US$18,700, meaning Tesla avoided a substantial impairment charge on its holdings by selling earlier in the quarter. Elon Musk’s company further added that its Q2 year-on-year operating income and profitability were impacted by the impairment of Bitcoin. In Q1 2021, the statement from the company had shown cash flow from digital assets worth US$272 million.

Due to uncertainty about when the lockdown would lift in Shanghai, Musk said Tesla unloaded 75% of its bitcoin holdings to maximize its cash position. “This should not be taken as some verdict of bitcoin,” Musk said in a Wednesday earnings call. “We haven’t sold any of our dogecoins.”

Elon Musk was one of the biggest crypto influencers in last year’s massive rally that saw BTC rising to near US$69,000 and many so-called experts predicting the oldest cryptocurrency may soon cross the US$100,000 mark. However, all predictions have fallen flat this year as crypto markets have lost around US$2 trillion in market cap and several crypto companies are eyeing bankruptcy.

However, Musk said the company is not heavily focused on cryptocurrency. It “is not something we think about a lot”, Musk said on the call. “It’s a sideshow to the sideshow. The fundamental good of Tesla and the reason we’re doing this is to have the day of sustainable energy come sooner. That’s our goal. We’re neither here nor there on cryptocurrency.”

Tesla did not specify how many Bitcoins it had initially bought or how many has it sold now, but Elon Musk last year hinted that the company may have invested in 42,000 Bitcoins. The company even started accepting payments in Bitcoin for a brief period, before discontinuing it, citing environmental concerns.

Musk also revealed that the company’s newest factories in Berlin and Texas are losing “billions of dollars right now” as supply chain issues stalled production.

“Just trying to keep the factories operating the last couple years has been a very difficult thing, like supply chain interruptions have been severe, like extremely severe,” Musk said in a May interview.

“The past two years have been an absolute nightmare of supply chain disruptions, one thing after another, and we are not out of it yet.”