Elon Musk miscalculated? Tesla Lost Hundreds of Millions Due to the Bitcoin Crash
Tesla may have just dumped 75% of its Bitcoin and admitted to losing tens of millions of dollars on its investment in the cryptocurrency, but Elon Musk says the electric carmaker isn't finished with cryptocurrency.
“We are certainly open to increasing our Bitcoin holdings in future,” said Musk on an earnings call with analysts on Wednesday. But the Tesla CEO, who at times has been one of cryptocurrency's most vocal bulls, downplayed the role of digital assets in Tesla's business. Tesla's main goal is to speed up the transition to renewable energy, which makes cryptocurrency a "sideshow to the sideshow," and "not something we think about a lot,” Musk said.
In February 2021, the electric carmaker disclosed that it owned $1.5 billion worth of Bitcoin, stating in a filing with the U.S. Securities and Exchange Commission that the purchase would help “further diversify and maximize returns on our cash.”
Tesla sold 10% of its Bitcoin in April 2021, but did not issue any more disclosures about crypto sales until its earnings report on Wednesday, when it announced it had sold 75% of its remaining Bitcoin.
Bitcoin and the broader crypto market have crashed in recent months, due to the collapse of high-profile projects like the Terra USD stablecoin, crypto hedge fund Three Arrows Capital, and crypto lender Celsius Network. Increasing interest rates also drove traders away from cryptocurrencies toward safer assets. Bitcoin is down 51.9% for the year.
Tesla's shareholder pretension says the carmaker sold 75% of its "Bitcoin purchases" for $936 million. On Wednesday's earnings call, Tesla CFO Zachary Kirkhorn said that the company sold the Bitcoin for "a realized gain," meaning that Tesla sold the Bitcoin at a higher price than what it paid for it.
Yet the carmaker also admitted that the Bitcoin it still owns is now worth much less than what it paid for it—and that the decline is large enough to offset the sum Tesla gained from its Bitcoin sale. Kirkhorn said that the net result was a "$106 million cost" to the carmaker's bottom line.
Why did Tesla sell its Bitcoin?
Musk said Tesla’s decision to vend its Bitcoin was not due to the declining value of the cryptocurrency; rather, he criticized China and its COVID cinch campo.
Tesla's Bitcoin trade "should not be taken as some verdict on Bitcoin. It’s just that we were concerned about overall liquidity of the company given shutdowns in China,” Musk said.
Shanghai’s two-month COVID lock down exacted annihilation on Tesla’s operations. Tesla’s Shanghai Gigafactory was compactly closed as workers were told to stay home to avoid spreading the coronavirus. indeed when the plant was allowed to renew under a unrestricted -circle system that forced workers to live on-point in military-style barracks, Tesla plodded with both corridor dearths and shipping dislocations. products and deliveries fell far short of the manufacturer’s targets.
On July 2, the company reported its first-ever decline in daily vehicle deals , which the company attributed to the dislocation in Shanghai.
Tesla's Dogecoin effects
Musk also bared for the first time on Wednesday's earnings call that Tesla owns Dogecoin, noting that the company hadn’t vended any of the canine-themed meme coin it holds. In the history , Musk has mentioned that he owns Dogecoin tête-à-tête, and has promoted the currency on his Twitter account. Tesla accepts the currency for some wares, but not for vehicles.
Tesla briefly accepted Bitcoin for vehicle purchases, but stopped the practice in May 2021 due to concerns about the environmental toll of Bitcoin mining.
Tesla shares jumped 1.5% in after-hours trading, after the carmaker reported a second-quarter profit that beat analyst expectations. Tesla's Wednesday earnings report did feature its first sequential quarter-on-quarter decline in profit, which Musk blamed on “supply-chain hell,” such as factory shutdowns, supply-chain disruption, and the chip shortage.
