China’s COVID Lockdown Made Tesla Sell Bitcoin Holdings, CEO Says
Tesla has sold off 75% of its Bitcoin holdings to bolster its cash reserves, the electric vehicle company has stated, citing the uncertainty surrounding the COVID-19 lockdowns in parts of China as the main factor for the action.
“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, so it was important for us to maximize our cash position,” CEO Elon Musk told investors on a July 20 earnings call.
Tesla had to shut its Shanghai factory for 22 days in April following a widespread COVID lockdown in China. On an April 20 call with investors, Tesla CFO Zach Kirkhorn said they “lost about a month of build volume” out of their factory in Shanghai as a result of the supply interruptions, and shutdowns. The company’s car production reportedly fell by 15% from the previous quarter due to the disruption.
The carmaker had bought Bitcoin worth about $1.5 billion in 2021 and only sold $101 million worth the same year. Meanwhile, according to its latest quarterly update, the company had converted approximately 75% of its Bitcoin purchases into fiat currency as of the end of Q2 with the conversions adding $936 million of cash to its balance sheet. In the process, Tesla reported a $106 million loss on the Bitcoin sale hence the impairment is identified in the report as one of the items that primarily impacted the company’s YoY operating income —one of the factors that hurt its profitability.
Despite the loss, though, and Musk maintaining that the company is still open to increasing its Bitcoin holdings in the future and has not sold any of its Dogecoin, Tesla’s Bitcoin sale come as a disappointment to some Bitcoiners – while others think it was a necessary non-bitcoin-centric move to add cash to the company’s balance sheet – who have called Musk out for breaking a promise he made. Musk, the world’s richest person, took to Twitter in May 2021 to say that Tesla will not be selling any Bitcoin.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
As a crypto advocate, Musk made waves last year when Tesla made a major investment in Bitcoin. Another promise he is now being called upon to defend is his statement that Tesla will resume accepting Bitcoin as a means of payment for its electric vehicles when the top cryptocurrency’s mining is ~50% sustainable. Musk announced in March 2021 that Tesla would accept the most popular and largest cryptocurrency for its products but had to halt it in May citing Bitcoin mining’s environmental concerns.
With the Bitcoin Mining Council now saying it has found that the sustainable power mix of the global Bitcoin mining industry has reached 59.5% to show that Bitcoin mining efficiency has increased by 46% as of Q2 2022, some enthusiasts have called Musk’s attention to his earlier statement.
The Tesla sell-off has now been juxtaposed alongside the forced selling from 3AC, the LUNA/UST collapse, and the Voyager, and Celsius bankruptcy filings as contributing to the adverse impacts the crypto markets have had in the past two months. Tesla reportedly still owns about 10,000 Bitcoin though.
In a related development, TRON’s Justin Sun has since tweeted that the TRON DAO Reserve plans to accumulate the estimated 32,000 Bitcoin supposedly sold by Tesla as reserves in the futures. He didn’t state when and how it would be done.