Has Tesla made a profit on Bitcoin?
Electric vehicle manufacturer Tesla released its quarterly earnings report earlier this week. The report states that Tesla converted 75% of its Bitcoin holdings to fiat currency, adding US$963 million cash to its balance sheet over the last 3 months.
Having previously sold around 10% of its Bitcoin earlier in the year, this latest sale means the company has just about come out even on its Bitcoin investment so far, once other costs, like impairment charges, have been factored in.
Why did Tesla sell its Bitcoin?
In Tesla's earnings call, CEO Elon Musk explained that the company sold its Bitcoin as a way to raise cash and boost liquidity in the face of a number of external factors that had affected its balance sheet.
The company stated that its profitability was impacted by factors including high raw material and logistics costs, negative FX impact and Bitcoin impairment.
Others have speculated that the sale was to ensure Tesla had a positive cash flow for the quarter or simply prudent risk management given the current macroeconomic climate.
What does this mean for Bitcoin?
The news of Tesla's sale saw the price of BTC drop around 5% in as many hours, but it soon stabilised. Musk and Tesla reportedly remain open to reinvesting in Bitcoin in future, and the sale did not represent a loss of faith in the cryptocurrency.
Musk is a polarising figure in the crypto space. His tweets throughout 2020 and 2021 were largely responsible for the exponential growth of the meme coin, Dogecoin, which saw over 20,000% returns during this time.
Musk also announced in March 2021 that Tesla would be accepting payments for vehicles in the form of Bitcoin. However, this decision was later overturned due to concerns surrounding the environmental impact of PoW mining.
Musk is an advocate for digital currencies and with over 100 million Twitter followers, his previous tweets have proven to move markets. He is yet to comment regarding the Tesla earnings report, although last month stated that he will "keep supporting Dogecoin".
The TSLA share price is down approximately 35% since April 2022, currently trading at US$724.50. The company has been forced to shut down its Shanghai factory due to lockdown restrictions and has reportedly laid off 229 workers in an attempt to further cut costs, after a significant drop in vehicle sales.
It's still uncertain whether Tesla has plans to sell more of its crypto holdings and what impact this might have on the market.
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