In a report that was published by the electric car maker, Tesla, it reported the selling of 75% of its holdings which amounted to 936 million dollars worth of Bitcoin. Its earnings report shed light on this fact and brought out to scrutiny the market. Therefore, the market demanded clarification from the owner, Elon Musk, explaining this step and why it was felt as a necessity at this particular time.
What were the reasons?
As suggested by Elon Musk, the selling of Bitcoin worth millions was a step that was taken to keep the cash position of the company in check. This was a necessity at this particular time as the Covid situation all over China and the lockdowns that followed had its fate of it uncertain. He further added that this step should not be taken as anything less or more than the reasons stated as Tesla has a greater vision for the future of Bitcoin.
Shortly, Tesla plans to boost the exposure of Bitcoin on a more global platform. Hence, the step taken is restricted to certain needs that the company must fulfill to maintain its position. He also mentioned that the Dogecoins owned by Tesla have not yet been sold.
Take a look at Bitcoin and its features
After the comments made by Tesla, the price of Bitcoin fell to a certain level given the uncertainty of the cryptocurrency. However, after Tesla remarked about the vision he has for Bitcoin, it went back to its former position. The comments that he had made in his earnings call helped Bitcoin restore to its previous levels.
Bitcoin had portrayed a major downfall in the last quarter which became one of the major reasons for its being sold in the second quarter. In the first three-quarters, Tesla had ended up with almost 1.2 billion dollars which took a downward turn in the last quarter. In the last quarter, it fell to as low as 216 million dollars.
As the company owned as many as 42000 Bitcoin at the time of the sale and sold them at 936 million dollars, the average cost of each Bitcoin was made to be 29,000 dollars. As the price of each Bitcoin fell to as low as 18, 700 after Tesla had sold its holdings, the company managed to save a fortune. This, make the sale a smart step and helped save the company a good and profitable impairment charge on its holdings.
How did Tesla impact the price of Bitcoin?
In February 2021, Tesla purchased Bitcoin worth 1.26 billion dollars which helped Bitcoin gain a lot of value in the market. As Tesla declared its purchase, the price of Bitcoin went up dramatically. In the later part of the first quarter, the company sold as much as 10% of its holdings and it was this move that was able to boost the earnings of that particular quarter. The selling or buying of Bitcoin was paused until the recent announcement made by Tesla.
Last year, in March Tesla, took the initiative of accepting Bitcoin as a form of payment for their cars. However, six months after this initiative was taken Musk called it off. The main reason for him calling it off was the harmful impact that Bitcoin mining had on the environment and the consequences it can lead to. , various steps have been taken and are supposed to be taken to analyze the situation with a team of expert analysts and take necessary actions.