Tesla, led by Elon Musk, confirmed that they bought around $ 1.5 billion in bitcoin in January and expect to start accepting it as a payment in the future.
Artur Widak | NurPhoto | Getty pictures
Early last year, Tesla invested $ 1.5 billion in bitcoin, focusing on what the electric car maker called the digital currency’s long-term potential ‘. The company has already sold three quarters of its holdings.
“Since the end of Q2, we have converted approximately 75% of our Bitcoin purchases to fiat currency,” Tesla said in its second quarter results report on Wednesday. The company said these sales provided $ 936 million in cash to the balance sheet.
It is a quick haven for Tesla and CEO Elon Musk, who was a powerful crypto-amplifier during last year’s run-up, and often tweeted about various digital currencies. The price of bitcoin has lost half its value in the last four months during what has been called a “cryptocurrency winter.”
For Tesla, the real market value of the bitcoin holdings reached $ 2.48 billion in the first quarter of 2021 and ended the year at around $ 2 billion. The company did not say at what price it sold or gave the size of the decline in value, but bitcoin started the second quarter at close to 46,000 dollars and ended below 19,000 dollars.
Barclays analyst Brian Johnson estimated earlier this week that Tesla would see a bitcoin-related impairment of $ 460 million given the sale.
“The reason we sold a bunch of our bitcoin holdings was that we were unsure when the Covid shutdowns in China would ease, so it was important for us to maximize our cash position,” Musk said in a revenue statement on Wednesday. “This should not be taken as a judgment on bitcoin,” he said, adding that Tesla is open to increasing its cryptocurrencies in the future.
But when asked about bitcoin’s potential as an inflation hedger of the earnings talk, Musk said that Tesla’s main goal is to accelerate the transition to sustainable energy, calling bitcoin “a side show to a side show.”
In the first quarter of 2021, when Tesla went big on bitcoin, the company said that the decision was a matter of becoming more flexible, diversifying and getting returns from cash. The company quickly sold 10% when the currency ran up, contributing $ 101 million in profit during the period.
Kirkhorn said at the time that the company’s intention was “to keep what we have in the long run and continue to accumulate Bitcoin from transactions from our customers when they buy vehicles.”
In May last year, Musk said Tesla would do it stop accepting bitcoin for car purchases due to the environmental impact of mining, but he added that the company “will not sell any bitcoin.” One week later, he tweeted emojis indicating that the company has “diamond hands” when it comes to bitcoin investments, and he credited “our coin master”.
A lot can change in a year.
– CNBC’s Lora Kolodny contributed to this report.
SEE: We are more concerned about Tesla’s quarterly results, this time, says CFRA’s Garrett Nelson