Musk Breaks Promise, Tesla Sells 75 Percent of Its Bitcoins

When Elon Musk and his Tesla purchased $1.5 billion in bitcoin at the beginning of 2021, it propelled the cryptocurrency to an astonishing $44,000. Subsequently, bitcoin further increased to $64,000, but Tesla did not benefit significantly from this rise. Just a month after investing in bitcoin, Tesla lost $200 billion, or 25 percent of its market value, which also knocked Elon Musk off the top spot as the richest person in the world.

However, two months after the bitcoin purchase, Tesla sold a portion, specifically 10 percent of the bitcoins acquired, leading to accusations against Musk of intentionally pumping the price and then ‘dumping’ to make millions.

A year after the massive purchase, Tesla announced that it was selling the majority of its bitcoins, specifically 75 percent of its bitcoins, worth approximately $936 million, according to the earnings report for the second quarter.

Tesla stated that ‘bitcoin impairment’ negatively impacted the company’s profitability during the second quarter, when the company achieved $2.5 billion in operating income.

Market Reaction

Bitcoin, which was trading above $24,000 on Wednesday, dropped sharply after the news. Five hours later, it was trading below $23,000, a decline of over 3 percent in just one hour.

Ethereum also fell by 3 percent in the last hour following the news of Tesla’s earnings report.

Tesla invested $1.5 billion in bitcoin in February 2021, after changing its investment policy in January to allow for holding digital assets. This was considered a very optimistic move at the time, so much so that bitcoin reached what was then a peak of $43,000.

Then, in May 2021, it seemed that Musk changed his stance, as he announced that Tesla would stop accepting bitcoin as a payment method, citing concerns about the environmental impact of bitcoin mining.

In its first-quarter report for 2022, submitted in April, Tesla stated that it believes in the long-term potential of bitcoin as a digital asset, both as an investment and as an alternative to cash.

However, they also warned shareholders that fluctuations in bitcoin prices tend to affect the company’s profitability.

– For example, in the first quarter of 2021, we recorded approximately $27 million in impairment losses resulting from the change in the carrying value of our bitcoin and gains of $128 million on certain bitcoin sales by us – the company wrote in its SEC filing on April 25.

Promises, Promises

Tesla’s CEO has been a strong advocate for cryptocurrencies for years, particularly his love for Dogecoin, and his statements on social media often spur growth and significant trading activity.

However, Musk has broken yet another of his many promises.

Last year, he stated Tesla’s position on bitcoin on Twitter when he said that Tesla will never sell bitcoin, but as we see, Tesla sold it. This promise is just another in a series from the richest man in the world who is evidently loose with his words when it comes to making promises. Perhaps he follows the old saying ‘what does it cost to promise‘ and promises without thinking, but it seems that this has not harmed his business career.

However, this is a good indicator or reminder that his words, which often ‘move markets’, are not set in stone. This move by Tesla is certainly not good news for bitcoin nor for crypto in general. Musk has helped the growth of currencies like bitcoin or dogecoin, which Tesla still holds in its possession.

In his latest address, Musk stated that he was not thinking about bitcoin when he sold it, but rather that he had a greater need for cash. He also referred to cryptocurrencies as a ‘side phenomenon’, which did not sit well with the crypto community.

He also added that the sale occurred due to uncertainty regarding COVID-19 restrictions in China and that the lockdown in Shanghai severely limited Tesla’s ability to produce vehicles at its factory there, reducing its overall sales for this quarter.

– We were uncertain when the COVID shutdown in China would ease, so it was important for us to maximize our cash position. We are certainly open to increasing our bitcoin holdings in the future, so this should not be taken as a judgment on bitcoin – Musk added.

The automaker stated that it still holds $218 million in digital assets, down from $1.26 billion at the end of the previous quarter. It justified its initial purchase by stating that it was seeking liquid assets that have more advantages than cash.