Elon Musk Sold Tesla's Bitcoin

Love him or hate him, Tesla founder and chief executive officer (CEO) Elon Musk has been labelled as an uncanny pioneer for the historic crypto rally of 2021. Musk’s electric vehicle company Tesla (NASDAQ: TSLA) first reported buying approximately $1.5 billion (USD) worth of Bitcoin in January of 2021 at an average price of roughly $32,000. Musk stated that this purchase would “further diversify and maximize returns on [Tesla’s] cash.” The celebrity CEO went so far as to state that Tesla would accept Bitcoin as payment for electric vehicle purchases made at Tesla stores.

Coincidentally or not, this set the stage for other big time companies and celebrities to accept deals in Bitcoin rather than cash. Other publicly traded companies (e.g., Ideanomics, Voyager) converted the cash they had on their balance sheets into Bitcoin. Professional athletes, such as star-studded NFL wide receiver Oddell Beckham Jr. and NBA point guard Spencer Dinwiddie, signed sporting contracts that called for their salaries to be paid in Bitcoin. Even the mayor of Miami, Francis Saurez, opted to receive his salary in Bitcoin.

During this stretch of time, Bitcoin rallied over 100% from Musk’s initial $32,000 purchas to highs exceeding the $64,000 mark. However, just as quickly as the stock price propelled upwards, the token capitulated back down under $20,000. At the time this article was written, Bitcoin is at a price of $23,486 USD.

Tesla Q2 Earnings

This all brings us to Tesla’s second quarter earnings call, which took place shortly after 4:00PM EST on Wednesday, July 20th. Revenue and earnings per share (EPS) fluctuations aside, the primary story resulting from this call was that Musk disclosed Tesla had liquidated 75% of its Bitcoin holdings merely a year after he opined about its long-term potential – in addition to advertising the promising prospects of all the cryptocurrency market as a whole. Musk stated that these transactions added $936 million USD in cash back to the balance sheet. Based on Musk’s statements, it is plausible to calculate that Tesla suffered a roughly $400 million USD loss from its Bitcoin “investment.”

During the earnings call, the celebrity CEO stated that the company was uncertain as to when COVID-related lockdowns in China would end – a major contributor to the production of Tesla products – and that Tesla had to maximize their cash position to cope with impending uncertainties. He ended the call by emphasizing the potential of Bitcoin to serve as a hedge against inflation and further stated that Tesla may increase its cryptocurrency holdings in the future.

What does this mean?

Tesla’s conversion of Bitcoin to USD means that Elon Musk does NOT have diamond hands. All jokes aside, it is difficult to interpret the broader significance of this liquidation event. Assuming that Musk spoke with veracity in Tesla’s earnings call, there may have been a legitimate need for fiat as one of the world’s largest electric vehicle producers had to meet corporate quotas and production costs during these uncertain times. In that case, can we really blame Musk for selling his Bitcoin holdings? That question is up for debate.

On the contrary – if Musk was extending a fib a little bit – does it really matter? A few sell orders by Elon Musk are unlikely to change Bitcoin’s long-term trajectory. It seems as though Musk was simply de-risking in an over-leveraged position, a common tactic that even the best of traders engage in amid their trading careers. It may be worth monitoring how other major conglomerates, holdings companies, and firms handle their cryptocurrency-based assets and balance sheets. Givner Law will continue to update our readers as these cryptocurrency moves are made more public by these larger players.

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