Indeed, Tesla has sold nearly $1 billion worth of Bitcoin, and the market accepted it admirably. Naturally, the price dropped below the previous all-time high for the first time in Bitcoin’s history, but there are good reasons for that. Not until yesterday night, when the company’s Q2 quarterly update leaked online, was the Tesla dump one of those reasons. Everything makes sense now.
As per Tesla’s report:
“In Q2, free cash flow of $621 million drove a sequential increase in quarter-end cash, cash equivalents, and short-term marketable securities to $18.9 billion, partially offset by $402 million in debt repayments.” We have exchanged about 75% of our Bitcoin purchases into fiat money as of the end of Q2. In Q2, conversions brought $936 million in cash to our balance sheet.
To explain why, allow me to paraphrase CNBC:
“We sold a bunch of our bitcoin holdings because we were uncertain as to when the COVID lockdowns in China would alleviate, so it was important for us to maximize our cash position,” Musk said during the call on Wednesday. “This should not be taken as some verdict on Bitcoin,” he continued.
The CEO, addicted to Twitter, has not commented on the matter on the social media network. Still.
What Does Tesla’s Paper Hands Say About Bitcoin?
Let’s review. First, Do Kwon’s disastrous attempt to create an algorithmic stablecoin could have been much better. The Luna Foundation Guard had to sell about 800K coins to maintain the UST peg to the dollar. The bitcoin market took a hit, but it also demonstrated its liquidity to handle this massive sell-off.
We now know that Tesla was also selling around the same time. Did Kwon’s antics scare them enough to cause them to panic sell? Hard to say. How much did they sell for? Difficult to identify. The market quickly took the cheap seats out of their hands without flinching; that much is certain. They sold another billion dollars worth of Bitcoin. The price dropped to previously unheard-of levels, but it is already rising again.
Then, the market had an emotional response when Tesla revealed the sell-off. NewsBTC, our sister website, reported:
The reports state that the business has changed its Bitcoin holdings into fiat money. As a result, Bitcoin experienced a rejection near the $24,000 price point and is currently trading at $23,100, down 2% in the last hour. The cryptocurrency has gained 20% over the previous week, and investors are still generally upbeat about potential future gains.
As of this writing, bitcoin is trading at $22.634, indicating that the news that Tesla is in financial trouble did affect the market. It wasn’t as horrible as everyone had anticipated, though. They were especially considering that, in the past, Tesla’s original Bitcoin investment played a significant role in driving the price of BTC to unprecedented heights.
BTC price chart for 07/21/2022 on Bitstamp | Source: BTC/USD on TradingView.com
What Will The Record Tell Us About Tesla’s Choice?
Elon Musk has yet to attempt to learn about Bitcoin, so we should be okay with the company’s sell-off. Nevertheless, it does. Tesla was not trying to make its books look nicer. They don’t appear to have made money from the sale; according to some reports, they may have lost money. “Covid lockdowns in China” don’t seem like an excellent justification. Furthermore, in this context, what does “maximize our cash position” mean? We’ll have to wait and see how the business uses the money.
In actuality, Tesla made a panic sale. Should this turn out to be accurate, anticipate seeing memes, tweets, and thought pieces about how much money the company would have made each time a Bitcoin pump occurred if their hands weren’t made of lettuce. In any case, anticipate seeing every one of those. The program has only just begun.
