Tesla CEO Elon Musk says the sale is not a death sentence for Bitcoin and he will buy back in the future.
On Wednesday, July 20, 2022, electric vehicle manufacturer Tesla revealed that it had sold 75% of its Bitcoin holdings during the second quarter, allowing it to add a total of $936 million to its balance sheet. Since 2021, Tesla updated its investment policy To include digital assets on its balance sheets, the company had acquired $1.500 billion worth of BTC.
At second quarter update The company notes that “cash equivalents and short-term marketable securities at the end of the quarter increased sequentially by $902M to $18,9B, driven primarily by free cash flow of $621M.”
The document goes on to explain that they have converted 75% of their Bitcoin holdings into fiat currency, adding $936 million to its balance sheet.
Despite the huge volume of the sale, experts are calm and point out that it is a common action to improve cash flow during times of economic downturn.
For his part, Elon Musk has explained that this sale has nothing to do with the price of Bitcoin or the state of the market. The Tesla CEO explains that “it should not be taken as a verdict for Bitcoin” and states that, in the future, they will buy again.
Why did Tesla sell its Bitcoin?
One of the first reasons Musk cites for the sale is the current economic situation in China. In this regard, the sale was prompted by concerns about a possible lack of liquidity due to the Chinese government's ongoing lockdowns due to COVID-19.
“The reason we sold a large portion of our Bitcoin holdings was that we weren’t sure when the COVID lockdowns in China would ease. So it was important for the company to be able to maximize our cash positions,” Elon Musk explained in a conference call with some investors.
At the meeting with their investors, Musk and Zachary Kirkhorn, Tesla's CFO, also explained that another reason for the sale was the costs of starting up the Megafactories in Berlin and Boston.
On the other hand, some analysts and experts, such as IDEG's investment director, Markus Thielen, have explained that the sale could be motivated by the fact that Some company investors believe Bitcoin is a distraction.
How has the Tesla sale affected the price of Bitcoin?
Unlike in 2021, when Tesla announced the first major Bitcoin purchase and the idea of starting to accept crypto as a form of payment, the news has had little effect on the value of the asset.
Yesterday, Bitcoin was trading above $23.000 on CoinMarketCap, reaching close to $24.000. After the news broke, the price fell to $22.000. However, at the time of writing, Bitcoin is worth $22.936, indicating that it is recovering and could continue to climb.
Last year, Tesla's announcement pushed the price of Bitcoin above $40.000 as it was the first time a major company bought cryptocurrencies and added them to its treasury. According to Tommy Honan, head of strategic partnerships at Swyftx, the move was like “a give permission to other companies for include cryptocurrencies in their balance sheets, which caused many institutional investors to enter the market for the first time.”
[hubspot type=cta portal=20298209 id=38fb28e1-1dc1-40e3-9098-5704ca7fcb07]
