Tesla has sold 75 per cent of its bitcoins. What was the reason for this decision?
Electric car maker Tesla has sold most of its reserves in Bitcoin in the second quarter of 2022. The information became available after the publication of the company’s fresh financial report, where the details of its interaction with digital assets were announced. To recap, Tesla announced a $1.5 billion BTC purchase back at the beginning of 2021, at the suggestion of CEO Ilon Musk. At the time, the event caused a huge stir in the market and contributed to further growth of Bitcoin, but now most of the coins have been sold. Here is a closer look at what is happening.
The cryptocurrency market reacted rather subdued to the news of Tesla selling bitcoins. Specifically, overnight, coins from the top ten cryptocurrencies by market capitalisation lost up to 10 percent of their price. Dogecoin lost the most percent of its value here, going above that mark.
The situation of cryptocurrencies today
And here’s a 30-minute chart of Bitcoin. As you can see, the first cryptocurrency’s slump was not significant.
Bitcoin’s 30-minute chart
Why Tesla sold cryptocurrency
Here’s a quote from the company’s quarterly report, published by news outlet Cointelegraph. It voices the fact that it is getting rid of digital assets.
As of the end of the second quarter, we had converted approximately 75 percent of our BTC into fiat currency. The conversions added $936 million to our balance sheet in the second quarter.
Consequently, most of Tesla's bitcoins are really missing - and that's a fact.
According to reports, the value of Tesla’s crypto reserves has been fairly stable. By the end of March, the company had $1.261 billion in digital assets. However, after eliminating a significant amount of bitcoins from its portfolio, Tesla’s crypto reserves are now only the equivalent of $218 million.
As a reminder, this is not the first time the car maker has reduced its position in crypto. Tesla first sold 10 per cent of its own bitcoins back in March 2021, making a profit of $128 million. At the time, Tesla CEO Ilon Musk made a statement that the sales were made ostensibly “to test market liquidity”. That is, the company wanted to make sure that the coin market would be able to accept the sale of such volume of coins and not collapse.
The information about the sale of BTC by the company appeared tonight and caused a muted and negative reaction from traders. In 12 hours at the time of writing, Bitcoin’s value has fallen by almost 6.5 per cent. At the moment, the price of the major cryptocurrency is just below the $23,000 level.
Bitcoin after news of Tesla
According to Ilon Musk himself, this round of cryptocurrency liquidation should not be taken as a complete rejection of Bitcoin. Here’s his rejoinder.
The reason we sold most of our Bitcoin reserves was because of uncertainty about when quarantine restrictions due to COVID-19 in China would ease. So it was important for us to maximise our position in the currency. We are, of course, prepared to increase our bitcoin holdings in the future.
Accordingly, the question of investing in Bitcoin and other digital assets for Tesla in the future remains open. By the way, Tesla hasn't gotten rid of Dogecoin - this information was also confirmed by Elon Musk.
Tesla CEO Ilon Musk
Unfortunately, Musk didn’t announce any tentative dates when Tesla could buy Bitcoin again. As recently as last year, he also removed BTC from the list of available payment options on the company’s website, promising to bring the crypto back there as soon as Bitcoin mining becomes more environmentally friendly. In other words, this is not the first time that Ilon’s company has had a negative impact on the crypto market through its actions.
Be that as it may, the fact of the sale is behind us - and the market has successfully survived it. Accordingly, it is unlikely that the niche will deteriorate further. Especially since the coins have reacted quite robustly to the news.
MicroStrategy CEO Michael Saylor commented on the event. The organisation in question is the largest owner of BTC among public companies. He did so with an extremely bizarre quote on Twitter.
If you sold 75 per cent of your own bitcoins, you would only be left with 25 per cent of your BTC.
As a result, the remark became the cause for jokes within the cryptocurrency community. In particular, a well-known crypto enthusiast under the nickname Coby commented on Michael's tweet with the phrase "sensational if true" and gathered more than 3 thousand likes.
Elon Musk and Dogecoin
The negative news doesn’t end there: the day before, Singapore-based trading platform Zipmex suspended withdrawals for customers, citing a “combination of circumstances” that are beyond its control. Here’s the relevant replica cited by Decrypt.
Due to a combination of circumstances beyond our control, including unstable market conditions and the resulting financial difficulties of our key business partners, in order to maintain the integrity of our platform we are suspending withdrawals until further notice.
Zipmex thus joins a growing list of cryptocurrency companies that have suspended withdrawals in recent weeks. Some of them ended up filing for bankruptcy, while others are still hoping to resume operations. Also earlier this month, another Singapore-based crypto platform called Vauld suspended all deposits, withdrawals and trading operations, citing financial difficulties amid market volatility.
We believe this news does not threaten the cryptocurrency market in any way going forward. However, bitcoin sales have already taken place, and the coins have since managed to increase in value quite nicely. In addition, Elon said that Tesla is willing to consider acquiring crypto in the future - but it will probably need more suitable macroeconomic conditions. So absolutely nothing has changed for coins in the long term.
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