Crypto industry insiders are unfazed by Tesla’s decision to sell 75% of its Bitcoin (BTC) holdings, saying it is a fairly typical strategy for companies to improve cash flow during economic downturns.
On Wednesday (20/7), the electric automaker revealed that it sold 75% of its bitcoin holdings in the second quarter, adding $936 million in fiat dollars to its balance sheet.
During a conference call, Tesla CEO Elon Musk noted that the sale “should not be seen as a judgment on Bitcoin,” explaining that the move was due to concerns about liquidity given the ongoing COVID-19 lockdown in China.
“The reason we sold a bunch of our Bitcoin holdings is because we weren’t sure when the Covid lockdown in China would be eased. Therefore, it was important for us to maximize our cash position:”
“We are certainly open to increasing our bitcoin holdings in the future.”
Asked by investors during the earnings conference call whether he sees Bitcoin as a long-term asset, Musk said the cryptocurrency was a “minor aspect” of Tesla’s main goal, which is to “accelerate the advent of stable energy.”
“Cryptocurrency is not something we think about a lot,” he said.
Markus Thielen, chief investment officer of IDEG, a Singapore-based digital asset manager, told Cointelegraph that Tesla would likely sell its bitcoin as it was “seen as a distraction from its core business”:
“I wouldn’t be surprised if Tesla continues to chomp on bitcoin when bitcoin stabilizes, otherwise they would have sold 100%.”
Equity trading expert at comparison site Finder Kylie Purcell explains that the electric car maker isn’t alone in its decision to “raise cash capital.”
She noted that “the world is heading towards an economic slowdown and possibly recession, it is not uncommon for investors and companies to transfer capital from more volatile assets to fiat currencies.”
She also added that although the price of Bitcoin fell after the announcement, there are already signs of a recovery.
On Wednesday (7/20), Bitcoin dropped nearly 2.6% after Tesla’s announcement and returned to $23,299 at the time of writing — near a one-month high, which means the crypto community probably wasn’t too concerned. regarding an advertisement.
So Tesla has already sold its shares, and seems to have done so mostly to keep cash flow positive (non-bitcoin-centric ratios) and still have 25% of BTC.
Maybe I’m trying to deal with it, but it seems like nothing.
– Will Clemente (WClementeIII) July 20, 2022
The muted reaction to the sale was different from the announcement in February of last year that Telsa had raised $1.5 billion worth of BTC to add to its balance sheet and planned to accept Bitcoin as payment for certain products (although this was later rescinded).
The news at the time saw bitcoin’s price immediately surge nearly $3,000, taking the cryptocurrency to a new all-time high above $43,000.
Swyftx’s head of strategic partnerships, Tommy Honan, told Cointelegraph that Tesla’s decision to buy Bitcoin last year was “as important a moment as you can imagine for digital assets”:
“It almost gave other companies permission to put cryptocurrencies on their balance sheets and we saw a lot of large institutional investors as well as small and medium-sized companies flooding the market from that point on.”
Musk said the sell-off was not a verdict on bitcoin, just a “cash play,” and the market seems to have taken his word for it. Bitcoin has been holding steady over the past 24 hours, and we would be surprised if other big investors follow suit, especially given the price of Current Bitcoin.