Tesla selling Bitcoin last year turned out to be a $500M mistake
Did you know that Tesla made a huge blunder by selling most of its Bitcoin holdings last year? 😱 The electric car maker could have made a whopping $500 million more if it had held on to its Bitcoin stash instead of dumping it in the market. 😢 Let's find out how this happened and what it means for Tesla and Bitcoin investors. 🕵️♂️
Tesla's Bitcoin trades: A brief history
Tesla shocked the world in February 2021 when it announced that it had bought $1.5 billion worth of Bitcoin as part of its treasury management strategy. 🚀 The move was seen as a major endorsement of Bitcoin by one of the most innovative and influential companies in the world, led by the visionary entrepreneur Elon Musk. 🙌 Tesla also said that it would accept Bitcoin as a payment option for its products, adding more legitimacy and utility to the cryptocurrency. 💯
However, Tesla's love affair with Bitcoin did not last long. 😔 In April 2021, Tesla revealed that it had sold 10% of its Bitcoin holdings in the first quarter of 2021, earning a profit of $101 million. 🤑 Musk said that the sale was done to prove the liquidity of Bitcoin as an alternative to cash on its balance sheet. 🤷♂️ He also claimed that he personally had not sold any of his own Bitcoin. 🙅♂️
In May 2021, Tesla made another controversial decision: It stopped accepting Bitcoin as a payment option, citing environmental concerns over the high energy consumption of Bitcoin mining. 😲 This caused a huge backlash from the Bitcoin community, who accused Musk of being hypocritical and manipulative. 😡 Some even speculated that Tesla had sold more of its Bitcoin holdings in the second quarter of 2021, anticipating a price drop. 📉
In July 2021, Tesla confirmed these suspicions: It had sold another 75% of its remaining Bitcoin reserves in Q2/2021, worth $936 million at the time. 😮 The company said that it made a profit of $64 million from the sale, which helped boost its earnings for the quarter. 💰 However, many Bitcoin supporters were disappointed and angry with Tesla's move, calling it a betrayal and a mistake. 😠 They argued that Tesla had missed out on a huge opportunity to benefit from the long-term growth potential of Bitcoin. 🚀
Tesla's Bitcoin mistake: How much did it cost?
To understand how much Tesla lost by selling its Bitcoin, we need to look at the price movements of Bitcoin since Tesla's initial purchase in February 2021. 🧐 Here is a chart that shows the monthly price of Bitcoin, along with Tesla's Bitcoin purchases and sales:
BTC/USD monthly price chart featuring Tesla's Bitcoin sales purchases and sales. Source: TradingView.
We can see that Tesla bought its Bitcoin at an average price of around $36,000 in February 2021. 🙌 It then sold 10% of its holdings in March 2021, when Bitcoin was trading around $55,000. 🤑 It then sold another 75% of its holdings in June 2021, when Bitcoin was trading around $35,000. 😢
If Tesla had held on to its Bitcoin instead of selling it, how much would it be worth today? 🤔 Well, as of April 14, 2023, Bitcoin is trading at around $31,000, which is still below Tesla's purchase price. 😞 However, it is also much higher than Tesla's sale price in June 2021. 😊 This means that Tesla could have avoided a huge loss if it had not sold its Bitcoin. 😱
Let's do some math to calculate how much Tesla lost by selling its Bitcoin. 🧮 We know that Tesla bought 42,902 BTC for $1.5 billion in February 2021. We also know that it sold 10% of its holdings (4,290 BTC) for $272 million in March 2021, and another 75% of its holdings (28,958 BTC) for $936 million in June 2021. This means that Tesla made a total profit of $165 million from its two sales. 🙌
However, we also know that Tesla still holds 10% of its original holdings (4,290 BTC) as of Q4/2022. 🙅♂️ These are worth around $330 million as of April 14, 2023. 💰 This means that Tesla's net profit from its Bitcoin investment is around $108 million ($165 million – $56.6 million). 🤑 Not bad, right? 😎
Well, not so fast. 😬 What if Tesla had not sold any of its Bitcoin? 🤷♂️ How much would it be worth today? 🤔 Well, if Tesla had kept all of its 42,902 BTC, they would be worth around $1.33 billion as of April 14, 2023. 😮 That's a whopping $500 million more than what Tesla made by selling its Bitcoin. 😱 In other words, Tesla made a huge mistake by selling its Bitcoin. 😢
Tesla's Bitcoin mistake: Why did it happen?
So why did Tesla sell its Bitcoin, and why did it sell so much of it? 🤔 There are several possible reasons for this decision. 😕 Here are some of them:
- Tesla needed cash to fund its operations and growth. 💸 Tesla is a capital-intensive business that requires a lot of money to build factories, develop new products, and expand into new markets. 💰
- Tesla's free cash flow (FCF) is a measure of how much cash it generates from its operations after deducting capital expenditures. 📊
- Tesla's FCF has been volatile and sometimes negative in the past quarters. 😬 For example, in Q1/2021 and Q2/2021, Tesla's FCF was $293 million and $619 million respectively. 🙌 However, in Q3/2021 and Q4/2022 However, in Q3/2021 and Q4/2022, Tesla's FCF was -$176 million and -$1.2 billion respectively. 😞 This means that Tesla was spending more money than it was making. 😱
- Tesla may have sold its Bitcoin to boost its FCF and improve its liquidity. 💵 This could also explain why Tesla sold more Bitcoin when its FCF was lower. 🤔
Tesla wanted to diversify its treasury assets. 🌎 Tesla is a global company that operates in different markets and currencies. 🌐 Tesla may have wanted to reduce its exposure to Bitcoin and diversify its treasury assets into other forms of cash or cash equivalents. 🏦 Tesla may have also wanted to hedge against the volatility and risk of Bitcoin, which can fluctuate significantly in price and face regulatory uncertainty. 😨 Tesla may have sold its Bitcoin to lock in some profits and avoid potential losses. 💸
Tesla was influenced by environmental and social factors. 🌱 Tesla is a company that prides itself on its mission to accelerate the transition to sustainable energy. 🌍 Tesla may have been concerned about the environmental impact of Bitcoin mining, which consumes a lot of electricity and generates a lot of carbon emissions. 😷 Tesla may have also faced pressure from its customers, shareholders, and stakeholders to align its values with its actions. 🙏 Tesla may have sold its Bitcoin to demonstrate its commitment to environmental and social responsibility. 🙌
In conclusion, Tesla's decision to sell its Bitcoin was a costly mistake that could have been avoided. 😕 However, it also offers some valuable lessons and prospects for both Tesla and Bitcoin.
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