Tesla invested $1.5 billion in bitcoin early this year, relying on the digital currency’s “long-term potential,” as the electric vehicle manufacturer put it. Three-quarters of the company’s assets have already been sold.
“As of the end of the second quarter, we have converted about 75% of our Bitcoin purchases into fiat cash,” Tesla wrote in its second-quarter results report on Wednesday. According to the firm, these sales raised its cash position by $936 million.
It’s a quick reversal for Tesla and CEO Elon Musk, who often tweeted about various digital currencies during the Bitcoin boom last year. Bitcoin’s price has dropped by half in the last four months, culminating in a “crypto winter.”
Tesla’s bitcoin assets were at $2.48 billion in the first quarter of 2021 and were worth around $2 billion by the end of the year. The corporation did not specify the price at which it sold its assets or the size of the impairment. Bitcoin began the second quarter above $46,000 and concluded below $19,000.
Given the selloff, Barclays analyst Brian Johnson forecasted earlier this week that Tesla will suffer a $460 million bitcoin-related impairment.
“We liquidated a lot of our bitcoin holdings because we weren’t sure when the Covid lockdowns in China would end, so it was vital for us to optimise our cash position,” Musk stated during an earnings call on Wednesday. “This should not be seen as a judgement on bitcoin,” he added, adding that Tesla is willing to increase its crypto assets in the future.
Nonetheless, when asked about bitcoin’s potential as an inflationary hedge on the results call, Musk indicated that Tesla’s primary goal is to accelerate the transition to sustainable energy and referred to bitcoin as “a sideshow to a sideshow.”
Tesla’s decision to go all-in on bitcoin in the first quarter of 2021 was motivated by the company’s desire to become more flexible, diversify its cash holdings, and produce returns on its cash reserves. As the value of the currency increased, the business quickly sold 10% of its assets, providing $101 million to the period’s profit.
At the time, Kirkhorn claimed that the company’s goal was to “keep what we have for the long term and continue to acquire Bitcoin from our customers’ transactions as they purchase automobiles.”
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