Bitcoin

Tesla Sells 75% of it's Bitcoin - Should You Be Concerned?!

It looks like Elon Musk isn't trying to hold on to Tesla's bitcoin during a crypto winter! Recently, the electric car company said in its Q2 earnings report that it had sold 75% of its Bitcoin holdings during the quarter. The coins were sold for $963 million by the company. So, should you be concerned about this move? Read on to find out!

February 10, 2022

Tesla Sells 75% of it's Bitcoin - Should You Be Concerned?!

Source: Vincere Wealth

I would like to bring to your attention a recent development in the news that, despite appearances, is not really all that significant.  And that is:  “Tesla has dumped 75% of its bitcoin holdings a year after touting ‘long-term potential”

It looks like Elon Musk isn't trying to hold on to Tesla's bitcoin during a crypto winter!

Recently, the electric car company said in its Q2 earnings report that it had sold 75% of its Bitcoin holdings during the quarter. The coins were sold for $963 million by the company.

Tesla has stated that its "digital assets" are still worth $218 million.

In February of last year, the company said that it had used its balance sheet capital to buy $1.5 billion worth of the cryptocurrency and that it would soon accept Bitcoin as payment for its cars. That announcement sent the cryptocurrency markets into a frenzy, which drove up the prices of a number of cryptocurrencies and made Musk a clear leader in the cryptocurrency world. Later, when he suddenly said that they were giving up on plans to accept cryptocurrency payments, he lost a lot of goodwill with the community.

The company is selling off its shares after the prices of all cryptocurrencies, including Bitcoin and Dogecoin, fell sharply. Musk has been a supporter of both cryptocurrencies in his social media posts and as CEO of Tesla. In an earnings call, the company's leaders said that the sale was done because they wanted to have as much cash on hand as possible during the uncertainty of China's COVID lockdowns.

“We are certainly open to increasing bitcoin holdings in future. So this should not be taken as some verdict on Bitcoin. It’s just that we were concerned about overall liquidity for the company given COVID shutdowns in China,” Tesla CFO Zachary Kirkhorn said.

The company's Q2 earnings report, which showed a $2.26 billion profit, was better than expected. However, the report didn't have much of an effect on the stock price at the time of writing, when after-hours trading was going on.

So, should you be concerned about this move?

To be honest, not at all. If you didn’t know, Tesla is a company that is currently operating at a loss. If you take away all of the subsidies that the government provides, what you're left with is a business that doesn't turn a profit at all. And so what they sought to do was take on debt while holding Bitcoin, which is a superior asset to hold in cash over the long term because it is going to retain the purchasing power that is already there. In addition to this, the financial return is substantially increased. The reality of the situation was that Tesla basically needed to sell this Bitcoin in order to show some type of profit, but they simply did not have enough time on their side to make it possible for them to do so.

Bitcoin is a Long-Term Investment

If you are interested in purchasing Bitcoin, you should consider doing so as a long-term investment. One that will be held for a long time, much longer than a year. You are making the wrong choice if you want to do this for six, nine, or even twelve months. You should think about this in terms of years, — particularly a decade. Think of this investment as a holding, a place where you want to make money and keep it. This is exactly what Bitcoin is, and it lets you keep the value you've made for a long time to come.

So, in light of this fact, Elon Musk and Tesla are rendered completely irrelevant. But as you know, there will be those individuals who say things like, "Oh well, they discarded everything." However, you can determine when they sold the coins, which was a factor in the cascade of selling that has already occurred as a result of the bitcoin price stabilizing around $22,000.

Is it possible that it might fall even further?

“Absolutely. But a substantial portion of the forced sellers, such as Bitcoin miners: stuff with Celsius and Voyager, block five, and all of these other folks who are currently there, have been washed out of the system, and the additional leverage has been gone.”  Consequently, we have just recently acquired this knowledge. The item has already been sold, and everything has already happened. So, this isn't putting any more stress on Bitcoin. When you look at the return on investment (ROI) of Bitcoin over time, you can see that its price doesn't change in a month.

Let's look at the pricing history of bitcoins:

CaseBitcoin is a site I like a lot because it shows the price of Bitcoins over time.

The return on investment must be compared to the value of traditional assets. This is what you should focus on the most. Another thing to keep in mind is that success in the past doesn't always mean success in the future. In every respect, this is accurate.  You should really think about Bitcoin over time and look at it from a risk point of view, taking into account both the upside and downside potential. Again, over a longer period of time, three years, five years, or even longer. If you have Bitcoin as part of your savings or investment tool, it has been a plus no matter how you look at it: the facts, the numbers, the backup, and the allocation to Bitcoin. You can also use it to save money or make investments.

So, nothing will change no matter what Tesla does. When it comes to the things they do, they have an unrealistically short time frame. Also, one of the things people like about bitcoin is that the asset class it is a part of is still pretty new.

Bitcoin is currently worth $432 billion. It has reached a trillion. As opposed to Gold, which is just under 11 trillion in stocks. But because Bitcoin has such a small market cap, many large institutions are unable to actually put their dollars to work by owning Bitcoin.  Since many of these institutions want exposure to Bitcoin but are unable to actually acquire it, you and I as individuals have the opportunity to advance ahead of them. When thinking about the benefits of Bitcoin above the kinds of traditional marketplaces that are available, keep this in mind. Try to understand why you would want to purchase Bitcoin in the future by thinking about it as though Elon Musk and Tesla had not done what they did. Even after taking all of this into account, we would still argue that the effort is worthwhile because the reward is greater than the risk. Find out more about it and determine whether or not it will work with the plan and the objectives you have set for yourself.

Bottom Line: 

Take care of yourself and don't allow the news and other sources of information to intimidate you. 

We hope you found this information helpful and that it answered any questions you may have had!  If you have any further questions, feel free to reach out here. I'd be happy to answer any questions you may have!

Cheers! 

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