Bitcoin Shrugs Off Tesla Sell Down

A 2nd quarter earnings report has revealed that electric vehicle manufacturer Tesla has sold 75% of its Bitcoin holdings. These holdings were worth ~US$936 million.

The firm, which is founded by technologist Elon Musk explained in a shareholder presentation that “Bitcoin impairment” had had a negative impact on the profitability of the firm. In Quarter 2, the price of BTC dropped from ~US$45,530 to ~US$20,110, a sharp ~55% drop. Tesla says the remaining value of its Bitcoin sits at $US218 million, in the previous quarter the firm’s BTC holdings stood at US$1.2 billion.

In its Q1 2022 letter, Tesla remained resolute in its commitment to BTC. Writing to shareholders that the company believed in the “long-term potential of digital assets both as an investment and also as a liquid alternative to cash.” The heavy loss in value of Bitcoin in Q2 appears to have made this position untenable.

In early 2021, Tesla initially invested US$1.5 Billion into Bitcoin, the firm also changed its business policy and allowed customers to make payments in BTC. The reaction to Tesla’s Bitcoin buy had an immediate effect on markets. It was perceived as a bullish flag and a mainstream moment for crypto. The price of BTC immediately shot up as a result.

In the two days following February 8th 2021, the day Tesla announced the Bitcoin purchase, the price of BTC jumped from ~US$38,883 to ~US$46569 – a 20% jump in value.

In the last two days, the announcement that Tesla had sold a chunk of its Bitcoin has interrupted a short bitcoin bull run, with the Bitcoin price dropping from ~US$24,160 to ~US$22,822 a ~6% decline. However, markets also appear to have shaken off the bearish news quickly. The price of Bitcoin is already rising again and is back above US$23,000.Source: @venturecoinist

The above chart posted by crypto price analyst Luke Martin compares the price reactions to Tesla initially buying BTC and Tesla selling 75% of its BTC positions. In both cases, there was an immediate reaction to the news, what was different in 2021 was the extended period of price momentum that continued for days after the event.

This time, Tesla’s move had much less impact on the Bitcoin price – a fact which has some observers excited. Pseudonymous crypto analyst @cryptoSqueeze, who has 116,700 twitter followers, wrote on Twitter “BTC not dumping after Tesla news is probably the most bullish thing ever. When bad news can’t tank the market, it can only go up”

Will Clemente, lead insight analyst at Blockware mused “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 seems like a nothingburger.” Clemente is implying that Tesla sold out of its Bitcoin position for financial reasons and not because the company has lost faith in utility of the Bitcoin network.

In May 2021, Tesla stopped accepting BTC for payments with Musk explaining that the decision was driven by the environmental impact of Bitcoin mining.

During the Q2 earnings call, Musk did mention Tesla may be open to increasing its Bitcoin holdings in the future. He said the decision to sell “should not be taken as some verdict against Bitcoin” and continued that "we were concerned about overall liquidity for the company given [COVID-19] shutdowns in China." This backs up the view that market observers had, that Tesla’s decisions were driven because of a short term need for cash, as opposed lack of faith in cryptocurrency (Musk also mentioned that Tesla did not sell any of its DOGE holdings).

That said, during the Q2 2022 earnings report investor Q&A, an anonymous institutional investor representing 10.8 Million TSLA shares asked Musk about the future of cryptocurrency, to which the eccentric billionaire’s response was decidedly ‘meh’.

“Tesla’s goal is to accelerate the advent of sustainable energy,” he said. “Cryptocurrency is a sideshow to the sideshow. So, cryptocurrency is not something we think about a lot.” He finished by saying, “my primary motivation here is to have the day of sustainable energy come sooner. That’s our goal. We’re neither here nor there on cryptocurrency.”