Tesla Inc. sold a significant portion of its stake in Bitcoin, an investment that helped legitimize the world’s largest electronic currency.
“As of the end of the second quarter, we have converted approximately 75% of our Bitcoin purchases to fiat currency,” Tesla said in a shareholder letter Wednesday as part of the company’s earnings report. “Second quarter conversions added $936 million of cash to our balance sheet.”
The electric car maker disclosed in February 2021 that it had invested $1.5 billion in Bitcoin and then sold 10% of its stake in April. Tesla said Wednesday that its digital assets have shrunk to $218 million, and a Bitcoin depreciation hurt profitability in the second quarter.
Elon Musk, Tesla’s chief executive officer, said during the earnings conference call that the company has sold the Bitcoin to maximize its cash position due to the uncertainty associated with the Covid shutdowns. He noted that the sale should not be seen as “a judgment on Bitcoin”.
The cryptocurrency has pulled back from a record high of nearly $69,000 in November. The largest cryptocurrency by market value wiped out gains after the sales were announced, falling a whopping $1.6% to $22,928.
Musk has become a huge influencer in cryptocurrency. He has tweeted positively about Dogecoin as an alternative and posted photos of his dog Floki who, like the Dogecoin mascot, is a Shiba Inu. When Tesla held a big party for its new factory in Austin in April, a drone show featuring a Dogecoin image was featured.
Musk’s embrace of Bitcoin had helped act as a catalyst for the digital currency after Tesla accepted the token shortly before purchases, but later suspended the payment option due to environmental concerns over its mining processes. The further pullback marks an aggressive move by one of the crypto sector’s most prominent bulls during what has been termed a “crypto winter.”
Still, Musk has positioned himself as pro-crypto, hinting in recent weeks that his other company, SpaceX, could join Tesla in accepting Dogecoin for future merchandise purchases.
Shares in MicroStrategy Inc., another major corporate buyer of Bitcoin, fell about 4% in post-market trading. At the end of the second quarter, the software company’s own Bitcoin stack was worth about $3.4 billion less than in the previous one.
Josh Olszewicz, head of research at crypto fund manager Valkyrie Investments, said rough estimates put Tesla’s Bitcoin sales at about $30,000, with $218 million in digital assets remaining on the balance sheet.
“Strongly bearish market conditions since the beginning of the year and the need for cash on the balance sheet likely contributed to this decision. From a treasury management perspective, the downward volatility may have been too unappealing to ignore in the short term,” said Olszewicz.