Crypto industry experts are largely unfazed by Tesla’s decision to sell 75% of its Bitcoin (BTC) holdings, saying it’s a fairly typical strategy for companies to improve cash flow during an economic slowdown.
On Wednesday, the electric vehicle maker revealed that it sold 75% of its bitcoin holdings in the second quarter, adding $936 million in fiat to its balance sheet.
On a conference call, Tesla CEO Elon Musk noted that the sale “should not be taken as a verdict for Bitcoin,” explaining that the move was due to liquidity concerns given China’s ongoing Covid lockdowns.
“The reason we sold a bunch of our bitcoin holdings was because we weren’t sure when the Covid lockdown 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.”
Asked by investors on the earnings call if he sees Bitcoin as a long-term asset, Musk said the cryptocurrency is a “sideshow to a sideshow” to Tesla’s main goal, which is to “accelerate the introduction of stable energy.”
“Cryptocurrency is not something we think about a lot,” he said.
Markus Thielen, chief investment officer at Singapore-based digital asset manager IDEG, told Cointelegraph that Tesla likely sold its bitcoin because it was “perceived as a distraction from their core business.”
“I wouldn’t be surprised if Tesla continues to bite Bitcoin when Bitcoin stabilizes, otherwise they would sell 100%.”
Compare Finder stock trading expert Kylie Purcell explained that the electric car maker was not alone in its decision to “accumulate capital in cash currencies”.
“As the world moves towards an economic slowdown and possibly recession, it is not unusual for investors and companies to move capital from more volatile assets into fiat currency,” she noted.
She also added that while the price of bitcoin has fallen after the announcement, there are already signs of a recovery.
On Wednesday, the price of Bitcoin fell roughly 2.6% after Tesla’s announcement and returned to $23,299 at the time of writing — tracking near its one-month high, which means the crypto community may not have been too bothered by the announcement.
So Tesla have already sold off their inventory, they seem to have done this mainly to maintain a positive cash flow (non-bitcoin oriented reasons) and they still have 25% of their BTC.
Maybe I’m getting it right, but it looks like a paltry burger.
— Will Clemente (@WClementeIII) July 20, 2022
The muted reaction to the sale played out differently from last February’s announcement that Telsa had raised $1.5 billion in BTC to add to its balance sheet and planned to accept bitcoin as payment for certain products (although this – was later canceled).
News on the team showed that the price of Bitcoin immediately jumped by almost $3,000, bringing the cryptocurrency to a new all-time high above $43,000.
Related: Bitcoin Price Drops Below $23K After Earnings Report Reveals Tesla Sold 75% of Its BTC
Swyftx’s head of strategic partnerships, Tommy Honan, told Cointelegraph that Tesla’s decision to buy Bitcoin last year was “as big a moment as you can imagine for digital assets.”
“It pretty much gave permission for other businesses to put crypto on their balance sheets and we’ve seen a lot of big institutional investors as well as small and medium-sized companies come into the market since then.”
“Musk said the sell-off was not a judgment call for Bitcoin, just a money play, and the market seems to have taken him at his word. The price of Bitcoin has stabilized over the past 24 hours and we would be surprised if other large investors follow suit, especially given the current price of Bitcoin.”
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