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 times of economic slowdown.
On Wednesday, the electric vehicle maker announced that it sold 75% of its bitcoin holdings in the second quarter, adding $936 million in fiat to its balance sheet.
During a conference call, Tesla CEO Elon Musk noted that the sale “should not be taken as a judgment on Bitcoin,” stating that the move was due to liquidity issues amid the ongoing Covid lockdowns in China.
“The reason we sold some of our bitcoin holdings was because we were unsure when the Covid lockdowns 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.”
When asked by investors during the earnings call if he sees bitcoin as a long-term asset, Musk said the cryptocurrency is a “sideshow” to Tesla’s main goal of “accelerating the advent of stable energy.”
“Cryptocurrency is something we don’t think about much,” he said.
Markus Thielen, chief investment officer at Singapore-based digital asset manager IDEG, told Cointelegraph that Tesla likely sold bitcoin as it was “viewed as a distraction from its core business.”
“I wouldn’t be surprised if Tesla keeps nibbling bitcoin when bitcoin stabilizes, otherwise they would have sold 100%.”
Stock trading expert Kylie Purcell of comparison site Finder explained that the electric car maker was not alone in its decision to “back up capital in cash currencies”.
“As the world heads towards an economic slowdown and possible recession, it is not uncommon for investors and companies to reallocate capital from more volatile assets to fiat currencies,” she noted.
She added that while Bitcoin’s price fell following the announcement, there are already signs of a recovery.
On Wednesday, bitcoin’s price fell about 2.6% following Tesla’s announcement and has returned to $23,299 at the time of writing — which is close to its one-month high, meaning the crypto community might not be overly concerned about the announcement was.
So Tesla has already sold off its holdings, appears to have done so mainly to maintain positive cash flow (non-Bitcoin-centric reasons), and still has 25% of its BTC.
Maybe I can get by, but it seems like a non-burger.
— Will Clemente (@WClementeIII) July 20, 2022
The muted response to the sale contrasted with the announcement in February last year that Telsa had raised $1.5 billion in BTC to add to its balance sheet and was planning to accept bitcoin as payment for certain products (although this later abolished).
The news at the time saw Bitcoin’s price immediately jump by nearly $3,000, taking the cryptocurrency to a new all-time high of over $43,000.
Related: Bitcoin price falls below $23,000 after earnings report shows Tesla sold 75% of its BTC
Tommy Honan, head of strategic partnerships at Swyftx, told Cointelegraph that Tesla’s decision to buy Bitcoin last year was “as important a moment as you can imagine for a digital asset.”
“It almost gave other companies permission to add crypto to their balance sheets, and we saw large institutional investors and small and mid-sized companies flock to the market from that point on.”
“Musk said the sale was not a judgment on bitcoin, just a cash play and it looks like the market took him at his word. Bitcoin’s price has stabilized over the past 24 hours and we would be surprised if other major investors followed suit, especially given Bitcoin’s current price.”