Tesla’s latest quarterly results revealed that the company’s attitude toward its Bitcoin (BTC) holdings substantially declined during the last three months. Alongside impacts caused by pandemic lockdowns and rising cost of materials and production, BTC’s price was listed as a “primary impairment” on the company’s operating income.
Tesla first purchased $1.5B of BTC in Q1 2021, which it revealed in an SEC filing in early February 2o21, citing diversification of assets as the reason for the massive purchase. Then, in March Tesla announced the ability to use bitcoin as a payment option for electric cars, only to suspend bitcoin payments for Tesla cars 50 days later over environmental concerns. This move occurred in the middle of the 2021 cryptocurrency bull-run, which first peaked in mid-April and reached its final top around $69K in November of that year before beginning its current bear-market.
In the latest earnings report, it was revealed that Tesla sold off 75% of its total BTC holdings through the months of April and June this year. The report cited “Bitcoin impairment” among the reasons for its operating income being impacted, alongside higher material and production costs. However, the company still reported an improved operating income for Q2. While exact dates of sale were not provided, this timeframe coincided with two major sell-offs in BTC price, the first dropping from $37K to $30K, and the second dropping from $30K to $20K per BTC. In the report, Tesla owned $1.261B in digital assets on March 31, but by June 30 only $218M remained. According to Coindesk, this sale amounted to $936M, and Elon Musk has expressed interest in boosting Tesla’s BTC exposure in the future. Musk also reportedly said that Tesla had not sold any of its Dogecoin.
The move to acquire BTC for a corporate balance sheet initially appeared to be a good idea and followed in the footsteps of MicroStrategy, as the $1.5B investment quickly turned into $2.5B, only to fall back around its original valuation once again after the first bull-run ended. BTC corrected by over 40% in the summer of 2021, during which time Elon Musk expressed no desire to dump Tesla’s bitcoin holdings. BTC would go on to print another all-time-high in November 2021, only to begin the most brutal bear-market of its 13-year history.
This isn’t the first time Tesla sold its BTC. It was just after the first peak in April 2021 that Tesla first sold some Bitcoin, resulting in a $100M profit for the auto-maker. According to the Q2 report, it seems Tesla held on to its BTC in the year leading up to Q2 2022, when it finally capitulated and sold off most of its holdings.
Tesla purchasing BTC and Elon Musk appearing on SNL were both viewed as “top signals” for the cryptocurrency market in 2021, and placed heavy bullish pressure on the price during that time. Tesla selling off nearly $1B of BTC over Q2 could have played a role in the massive price sell-offs during that time, but it is unclear how the company liquidated its holdings or if it had any effect on the market. While cryptocurrencies have seen a considerable rally recently due to excitement over Ethereum’s upcoming upgrade, it remains to be seen if BTC will hit the price range many traders are aiming for. One thing that is certain is Tesla will likely purchase more BTC in the future, and if short-term price predictions turn out to be true then Tesla could attempt to buy the dip.