Crypto industry insiders are unfazed by Tesla’s decision to sell 75% of its bitcoin (BTC) assets; they say it’s a fairly typical strategy for companies to improve cash flow during economic downturns.
On Wednesday, the electric vehicle manufacturer revealed that it had sold 75% of its bitcoin holdings in the second quarter of the year, adding $936 million in fiat to its balance sheet.
During a conference call, Tesla CEO, Elon Musk noted that the sale “should not be taken as a verdict on bitcoin,” explaining that the move was due to liquidity concerns given ongoing COVID-19 shutdowns in China.
He added: “The reason we sold a bunch of our bitcoin holdings was that we weren’t sure when the Covid lockdowns in China would ease. So it was important for us to maximize our cash position:”
“We are certainly open to increasing our holdings in bitcoin in the future.”
Asked by investors during the earnings call if he viewed bitcoin as a long-term asset, Musk said that cryptocurrency was a “sideshow” to Tesla’s main goal, which is to “accelerate the arrival of stable energy.”
“Cryptocurrencies are not something we think about very much,” he said.
Markus Thielen, chief investment officer at Singapore-based digital asset manager IDEG, told Cointelegraph that Tesla likely sold his bitcoin as it was “seen as a distraction from his core business:”
“I wouldn’t be surprised if Tesla kept buying bitcoin when it stabilizes, otherwise they would have sold 100%.”
Stock trading expert at comparison site Finder, Kylie Purcell explained that the electric car manufacturer has not been the only one that has decided to “shore its capital in cash currencies”.
“As the world is entering an economic slowdown and possibly a recession, It’s not unusual for investors and companies to move their capital away from more volatile assets in favor of fiat money,” he noted.
He also added that, Although the bitcoin price fell after the announcement, there are already signs of recovery.
On Wednesday, the bitcoin price fell by approximately 2.6% following the Tesla announcement and has returned to $23,299. at the time of writing, following close to its one-month high, which means the cryptocurrency community may not have been too concerned about the announcement.
So Tesla has already sold off their inventory, appears to have mainly done so to maintain positive cash flow (non bitcoin-centric reasons), and still has 25% of their BTC.
Maybe I’m coping but it seems like a nothingburger.
— Will Clemente (@WClementeIII) July 20, 2022
So Tesla has already sold his inventory, and it appears he has done so primarily to maintain positive cash flow (non-bitcoin-centric reasons), and still has 25% of his BTC. Maybe it’s my way of processing it, but it looks like a burger from nothing.
The muted reaction to the sale played differently from the announcement in February last year that Telsa had added $1.5 billion worth of BTC to its balance and was planning to accept bitcoin as payment for certain products. (although this was later scrapped).
The news at the time caused the bitcoin price to immediately skyrocket almost $3,000, taking the cryptocurrency to a new all-time high. above USD 43,000.
Swyftx head of strategic partnerships Tommy Honan told Cointelegraph that Tesla’s decision to buy bitcoin last year was “as important a moment as you can imagine for digital assets:”
“It almost gave other companies permission to add crypto to their balance sheets, and we saw a lot of institutional investors, as well as small and mid-caps, flood the market from that point.”
Honan added: “Musk said the sale was not a verdict on bitcoin, but a cash play, and it appears the market has taken him at his word. The price of bitcoin has stabilized over the last 24 hours and we would be surprised if others big investors follow suit, especially considering the current price of bitcoin.”
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