Why Did Tesla Sell Almost All Its Bitcoins?

In early 2024, Tesla Corporation invested $1.5 billion in bitcoin; at the time, the cryptocurrency was worth about $44,000. A year and a half later when bitcoin’s capitalization had roughly halved, it became known that Tesla had almost withdrawn from the asset.

According to the company’s latest report, as of the second quarter of 2024, Tesla had sold about 75% of the bitcoins it bought for a total of $1.5 billion. The company then officially announced that digital currencies have “long-term potential.”

How Tesla reported theirs decisions about selling Bitcoin and Dogecoin

“At the end of the second quarter, we had converted approximately 75% of our Bitcoin purchases into fiat currency,” Tesla said in its second-quarter earnings report.

Tesla raised $936 million by converting 75% of its Bitcoin purchases. The average selling price is $29,000 per bitcoin.

“The reason we sold some of our bitcoin holdings was because we weren’t sure when the quarantine on Covid in China would ease, so it was important for us to maximize our cash position.”

“This should not be taken as any kind of judgment on Bitcoin,” Elon Musk said, adding that Tesla is open to increasing its crypto assets in the future.

Tesla had $2.48 billion invested in Bitcoin at the end of its Q1 2024 report, down from $2 billion at the end of the year. Selling Bitcoins at $29,000 generated essentially no revenue for Ilon Musk’s company, as the average purchase price in December 2020 was about the same level.

Analyst Brian Johnson of Barclays wrote a few days ago that “given this week’s drop, Tesla will face a $460 million bitcoin devaluation given the sale.”

Incidentally, Elon Musk wrote that he hasn’t sold Dogecoin and he reportedly wants to make the coin an official cryptocurrency on Twitter.

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Tesla and the stock market

Tesla’s Q2 earnings were above Wall Street forecasts. At the same time, the company failed to continue its record series of quarterly earnings. While last quarter’s figure reached $18.7 billion, this quarter’s is a more modest $16.9 billion. Adjusted earnings per share is $2.27 versus Wall Street’s expectation of $1.81.

Investors were generally favorable to Tesla’s quarterly report. TSLA stock was up 1.5% at the close of trading. Compared to their November 2024 peak, they are still 40% cheaper.

Tesla delivered 254,69 thousand cars, up from 310,000 a quarter earlier (+27% year-on-year). The company explained that global supply chain disruptions and labour shortages, among other problems, prevented the plants from running at full capacity. The company’s shares are up 1.45% to $753.3 apiece after the close of trading.

Tesla has no specific plans for electric car deliveries this year, 2024. The PRC plant finished the quarter with a record monthly production rate. The Gigafactory in Berlin reached a weekly production level of 1,000 cars in June. Weekly production for the Berlin and Austin, Texas, plants is expected to reach 5,000 cars by the end of the year.

In addition to producing cars, the company continues to focus on developing the accompanying infrastructure. Stores and service centers grew by 19% year-on-year and charging stations by 34%.

However, let us come back to the cryptocurrencies of Tesla and Elon Musk

The value of the company’s remaining bitcoin assets is about $218 million, although in previous quarters the figure was equivalent to $1.2 billion. Over the past two months, the value of bitcoin has fallen several times. It’s now trading around $20,000 per bitcoin, and in mid-June it collapsed to November 2019 levels – below $19,000 per coin.

Musk, telling investors about the cryptocurrency sale, asked them not to see the move as a “verdict on bitcoin.” He said the company is open to increasing its cryptocurrency assets in the future.

Tesla used to allow cryptocurrency to pay for purchases of electric cars, but abandoned that method in May 2024, explaining the decision by environmental risks. Bitcoin mining uses electricity from fossil fuel power plants rather than renewable energy sources.

What Elon himself said in early 2024 after buying bitcoin

Earlier, Tesla CEO Elon Musk called the company’s investments in bitcoin risky and hinted that the decision to buy the cryptocurrency for $ 1.5 billion was not made by him.

Earlier, Changpeng Zhao, founder of the cryptocurrency exchange Binance, wondered why Tesla invested in bitcoin and not in the Dogecoin project, which Musk is passionate about.

“Tesla’s actions do not directly reflect my position. Having some bitcoin, which is simply a less stupid form of liquidity than cash, is risky enough for an S&P 500 company,” the Tesla CEO wrote on Twitter, commenting on Zhao’s words.

Musk stressed that he himself is an engineer and does not invest in anything. He does not have papers of public companies, except for Tesla. That said, the billionaire believes that with the negative interest rates of traditional currencies, it is foolish not to look in “some other direction.”

“Bitcoin is almost as good as fiat money (regular money issued by states. – Note: “Secretariat”). The key word is ‘almost,'” Musk added.

At the end of January 2024 with one tweet about bitcoin in minutes Musk raised the value of the cryptocurrency from $32,000 to $37,000. In February, Tesla announced that it was investing in bitcoin and was ready to accept it as payment for its products. The cryptocurrency has since risen to $44,000. On February 16, bitcoin broke the $50,000 mark for the first time, and two days later it rose to $52,000.

Another cryptocurrency that has been in Musk’s sights lately is Dogecoin. It appeared in 2013 for a joke. Its name refers to the Internet meme Doge with a Shiba Inu dog, which was particularly popular at the time. In December 2020, the head of Tesla tweeted the phrase: “One word: Doge. That was enough to make the meme-currency start to appreciate sharply.

Subsequently, the digital coin attracted a solid audience of cryptoinvestors and miners due to its democratic image and fast enough mining. Only for the last year Dogecoin increased in price by 1500%, and its capitalization reached $9 billion, which is comparable to the cost of large public companies. As of 12:55, the currency is trading at $0.055.