- Elon Musk said that the only reason to sell BTC holdings was to maximize the company’s cash position amid market uncertainty.
- Tron founder explains three major reasons why selling their BTC could be good for the Bitcoin community.
On Wednesday, July 20, electric carmaker Tesla confirmed that its sold 75 percent of its Bitcoin holdings during the second quarter. The company said that it sold its BTC early in April 2022 adding $936 million in cash to its balance sheet.
Explained the reason behind this liquidation, Tesla said that the uncertainty with COVID lockdowns in China led to this decision. In April 2022, Tesla had to shut down its Shanghai factory for a period of 22 days. Explaining the same, Tesla CEO Elon Musk said:
The reason we sold a bunch of our bitcoin holdings was that we were uncertain as to when the covid lockdowns in China would alleviate, so it was important for us to maximize our cash position.
This should not be taken as some verdict on Bitcoin. It’s just that we were concerned about overall liquidity for the company.
Tesla has been taking careful moves amid the current uncertainty in the global macro environment. Amid the macro headwinds, Tesla has been cutting jobs alike other giant companies.
Interestingly, while Tesla sold a huge chunk of its BTC holdings, it continues to hold all of its Dogecoin (DOGE). “And we have not sold any of our Dogecoin,” added Elon Musk.
Tesla has a $106M impairment loss
Zach Kirkhorn, the Chief Financial Offer at Tesla said that the company made a small profit from their BTC sale. However, he said that these gains get erased considering the impairment charges on the remaining of its BTC holdings.
Kirkhorn further said that the realized gain is “offset by impairment charges on the remainder of our holdings, netting a $106 million cost to the P&L included within restructuring and other”.
Elon Musk also said that the company is “certainly open to increasing our bitcoin holdings in the future”. However, this won’t happen anytime soon looking at the global macros. Currently, Tesla has been dealing with major operational challenges while facing the heat of market slowdown. Due to the Shanghai shutdown, Tesla’s car production tanked 15 percent in Q2 2022, in comparison to the previous quarter.
Bitcoin has come under a bit of selling pressure owing to the Tesla news. After shooting past $24,000 on Wednesday, BTC has slipped under $23,000 once again. Currently, BTC is trading close to its 200-week moving average of $22,800 which has served as a crucial level of resistance.
Why is Tesla selling Bitcoin great news?
Although the Bitcoin community might not be happy with Tesla liquidating a majority of its BTC holdings, Tesla selling Bitcoins could be great news believes Tron founder Justin Sun. The Tron founder pointed out three reasons behind this optimism:
- Market no longer needs to worry about @Tesla selling BTC which has been haunting us for a long time.
- Tesla selling nearly 1 BIL USD worth of BTC shows the liquidity of @Bitcoin to all big corps.
- Tesla completing @Bitcoin transactions shows good precedence for all enterprises holding BTC. We believe more big corps will buy in the future. Kudos to @elonmusk!