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When did Tesla sell 75% Bitcoin?

Tesla’s involvement with cryptocurrency, specifically Bitcoin, has been closely watched by investors and enthusiasts alike. In early 2021, Tesla made headlines when it announced it had purchased $1.5 billion worth of Bitcoin. Later that year, Tesla also began accepting Bitcoin as payment for its vehicles. However, in the second quarter of 2021, Tesla sold off 75% of its Bitcoin holdings which sparked a lot of discussion and speculation.

When Did Tesla Buy Bitcoin?

In February 2021, Tesla announced in an SEC filing that it had purchased $1.5 billion worth of Bitcoin. The news sent Bitcoin prices soaring and lent further legitimacy to cryptocurrencies. Tesla said its decision was aimed at “diversifying and maximizing returns” on excess cash. The $1.5 billion represented around 7.7% of Tesla’s cash on hand at the time.

Tesla’s Bitcoin purchase followed a few other moves by the company related to cryptocurrency. In January 2021, Tesla updated its investment policy to provide more flexibility and allow investments in digital assets. Then in the same SEC filing that announced the Bitcoin buy, Tesla also said it planned to begin accepting Bitcoin as payment. The price of Bitcoin jumped over 15% on the news.

Tesla Begins Accepting Bitcoin Payments

In March 2021, Tesla began allowing customers to purchase its vehicles with Bitcoin. It represented a major step towards mainstream adoption of cryptocurrency as a payment method. Tesla said Bitcoin paid to the company would be retained as Bitcoin and not converted into fiat currency.

However, Tesla did not adopt Bitcoin payments for long. Just two months later in May 2021, Tesla suspended vehicle purchases with Bitcoin due to concerns about its environmental impact. Tesla CEO Elon Musk said the company was “concerned about the rapidly increasing use of fossil fuels for Bitcoin mining.” This caused an immediate drop in the price of Bitcoin.

When Did Tesla Sell Its Bitcoin?

The big sell-off of Bitcoin by Tesla occurred in Q2 2021. Specifically, Tesla sold 75% of its Bitcoin holdings sometime between April 1 and June 30. The exact timing is unknown. Tesla reported the information in its Q2 2021 financial results released in July 2021.

Tesla disclosed that it sold $272 million worth of Bitcoin during Q2. Since the company was known to be holding around $1.5 billion worth, selling $272 million represented about 75% of its holdings. The sale amounted to about 10% of Bitcoin’s trading volume during that time period.

Financial Impact on Tesla

By selling 75% of its Bitcoin, Tesla cashed out of most of the position at a substantial profit. The company had paid an average price of $34,700 per Bitcoin. In Q2, Bitcoin prices ranged between about $30,000 on the low end and $64,000 on the high end before ending near $35,000. This suggests Tesla likely sold nearer to the top and made a significant gain.

Tesla reported a $101 million “positive impact” from its Bitcoin transactions during Q2. While the exact profit amount is unknown, it indicates the majority of the $272 million in proceeds from Bitcoin sales represented gain compared to Tesla’s purchase price.

Metric Q2 2021
Bitcoin Sales $272 million
Positive Impact from Bitcoin $101 million

After selling 75% of holdings in Q2, Tesla was left with about $187 million worth of Bitcoin on its balance sheet at the end of June 2021.

Why Did Tesla Sell Its Bitcoin?

Tesla did not provide explicit reasons for selling the majority of its Bitcoin. However, there are a few likely factors that contributed to the decision:

1. Take Profits

The first motivation was likely profit-taking. With Bitcoin prices volatile and at that time not too far from Tesla’s purchase price, the company saw a window to lock in gains from its investment. Executing the sale also crystalized the gain on Tesla’s balance sheet.

2. Reduce Risk

Tesla may have also wanted to reduce risk exposure by lowering the portion of its assets held in the volatile Bitcoin. While cryptocurrency appeals to Tesla’s high-risk culture, the company still takes a diversified approach to investing excess cash. Selling some Bitcoin likely helped rebalance the risk profile.

3. Boost Cash Flow

The $272 million cash influx from selling Bitcoin provided useful liquidity to fund Tesla’s operations. Tesla reported free cash flow of $619 million in Q2 2021 – a key metric for the company. The Bitcoin sale contributed nearly half of that amount, signaling it was an important cash flow factor in the quarter.

Market Reaction and Later Developments

While Tesla’s Q2 Bitcoin sale amounts to an historical footnote today, it did spark a variety of reactions at the time in mid-2021:

  • The price of Bitcoin dropped around 10% after Tesla’s filing revealed the extent of the sale.
  • Some viewed the large-scale liquidation as Tesla losing confidence in Bitcoin and cryptocurrency.
  • Others saw the sale as a reasonable financial move to lock in substantial gains.
  • Critics highlighted the environmental impact of Bitcoin mining as motivation for Tesla’s sale.
  • The sale also raised questions if Tesla would buy back into Bitcoin in the future.

Since the Q2 sale, Tesla’s remaining Bitcoin holdings have fluctuated on its balance sheet as the price has gyrated. The company did also recently resume accepting Bitcoin as payment again for its products. However, Tesla has made no major new Bitcoin purchases since its original $1.5 billion investment in early 2021.

Current Status of Tesla’s Bitcoin Holdings

As of September 30, 2022, Tesla held $218 million worth of Bitcoin on its balance sheet. That represents a slight gain from its cost basis after the Q2 2021 sale, but remains significantly lower than the original $1.5 billion investment. For now, Tesla seems content holding a smaller Bitcoin position as a minor portion of its $20+ billion in cash reserves.

Conclusion

Tesla sent shockwaves through the cryptocurrency world when it announced the purchase of $1.5 billion in Bitcoin in early 2021. However, the company also then sold off 75% of its holdings just a few months later in Q2 2021 for a substantial gain. The exact timing of the sale is unknown beyond occurring sometime in April-June 2021 based on Tesla’s financial reporting.

The sale liquidated the majority of Tesla’s Bitcoin investment for a profit and also reduced the company’s risk exposure. While Tesla has held onto some Bitcoin since, it has made no major additional purchases. Going forward, Tesla seems to view holding a smaller Bitcoin position as sufficient for now.

The Q2 2021 Bitcoin sell-off highlighted the volatile nature of Tesla’s cryptocurrency strategy. The company moved aggressively with its initial investment but then also acted decisively to take profits when possible. Both the buy and sell side reflect Tesla’s high-risk tolerance for new technologies like blockchain and digital assets.

In total, Tesla sold approximately 75%, or $272 million, of its Bitcoin holdings in Q2 2021. The company reported a $101 million gain on its sales, crystallizing a solid return from its initial investment. While the market reacted negatively at first, the sale made financial sense from Tesla’s perspective.

Cryptocurrencies remain extremely volatile, speculative assets. Tesla’s foray into Bitcoin reflects the company’s unique risk appetite and its tendency for eye-catching announcements. However, Tesla also manages risk by being willing to sell positions, as evidenced by the Q2 2021 Bitcoin liquidation. Looking ahead, Tesla seems to view holding smaller amounts of digital assets like Bitcoin as aligning to its strategic interests.

Tesla’s involvement with Bitcoin since early 2021 has mirrored the rollercoaster-like ride of cryptocurrency markets in general. The company’s major purchase, partial sale, suspension of Bitcoin payments, and resumption of accepting it again all underline the fluid nature of this emerging space. While Tesla retains a stake in Bitcoin, large open questions remain on whether it will ever return to holding a position as large as the original $1.5 billion purchase.