Did Tesla Crash the Bitcoin Market?

Zinger Key Points
  • Tesla entered the second quarter with a reported 42,000 Bitcoin, a position it sold 75% of in the quarter.
  • Tesla ended the second quarter with $218 million remaining in digital assets on its balance sheet.

Electric vehicle company Tesla Inc TSLA purchased $1.5 billion of Bitcoin BTC/USD in January 2021. After two sales, the company now holds less than $250 million of the leading cryptocurrency. Did the timing of a recent sale help lead Bitcoin into a crash?

What Happened: Tesla announced Wednesday in its second quarter earnings report that it converted 75% of its Bitcoin holdings into fiat currency during the quarter.

“Conversions in Q2 added $936 million of cash to our balance sheet,” the company said.

After the sale, the company has $218 million remaining in digital assets on its balance sheet, which could include both Bitcoin and Dogecoin DOGE/USD, which it accepts as a payment option for merchandise.

Benzinga reported Wednesday that Tesla’s $1.5 billion in Bitcoin has a value of $1.426 billion when factoring in two previous sales and the remaining amount on the balance sheet.

The Bitcoin could be worth significantly less if Tesla didn’t time the sale in the second quarter, potentially as well as they did.

A report from CoinDesk said Tesla had around 42,000 Bitcoin heading into the second quarter. Based on the $936 million in sales, the average price of the Bitcoin sold would have been around $29,000.

Bitcoin traded above $30,000 in April and the start of May. By June 11, Bitcoin had fallen to new 52-week lows of under $27,000.

A big drop occurred for Bitcoin from June 13 to June 18 with the cryptocurrency hitting a new 52-week low of $17,708.62 on June 18. Bitcoin didn’t come back to the $28,000 level in the rest of June, which means at least the majority of Tesla’s Bitcoin sale happened prior to the June crash of the cryptocurrency.

A look at past events shows that the June 12 to June 18 time period included several big events for Bitcoin.

Related Link: Did Tesla Make Money On Its $1.5 Billion Bitcoin Purchase? 

Why It’s Important: On June 12, Celsius said it was pausing withdrawals, swaps and transfers for account holders “due to extreme market conditions.”

Major liquidations for Celsius and 3AC were reported on June 17 by Benzinga. Celsius posted 7,206 WBTC WBTC/USD as collateral to reduce its Bitcoin liquidation price to $16,582.

Sell-off pressure on the cryptocurrency market was noted, with cryptocurrency lending and borrowing firms seeing liquidity problems.

In July, Celsius, 3AC and Voyager Digital LLC VYGVQ were among the companies that declared bankruptcy due to issues faced in June and July.

Tesla likely sold the majority of its Bitcoin in the later half of May or early June, given the trading ranges and the amount of the cryptocurrency it held.

A large sale of nearly $1 billion in Bitcoin by Tesla could have contributed to the crash seen by Bitcoin and other cryptocurrencies.

Tesla CEO Elon Musk had previously said the company could sell Bitcoin depending on market conditions. Musk added a reason why the company decided to sell a portion of its BTC in the second quarter.

“The reason we sold a bunch of our Bitcoin holdings was that we were uncertain as to when the COVID lockdowns in China would alleviate,” Musk said. “So, it was important for us to maximize our cash position given the uncertainty of the lockdowns.”

Based on the trading range of Bitcoin on June 30, the $218 million in digital assets left on the Tesla balance sheet, the company could have between 10,823.61 BTC and 11,639.29 BTC.

TSLA, BTC Price Action: Tesla shares are 0.61% to $820.11 on Friday.

Bitcoin is up 1% to $23,173.37 over the past 24 hours at the time of publication.

Photo: Created with an image from Steve Jurvetson on Flickr

Disclosure: Benzinga CEO Jason Raznick Is a member of the unsecured creditor committee in the Voyager Digital bankruptcy case. 


Posted In: CryptocurrencyNewsPenny StocksMarkets3ACBitcoinCelsiusdogecoinElon MuskVoyager