The decision by Tesla (TSLA) to sell 75% of its bitcoin (BTC) holdings is unlikely to have a big influence on whether other businesses would add cryptocurrency to their corporate treasury.
To begin with, CEO Elon Musk hasn’t completely given up on Tesla’s bitcoin position; he stated during the conference call that he’s still willing to increase the company’s bitcoin holdings at some point in the future.
During the call, Musk cautioned, “This should not be viewed as some judgment on bitcoin,” adding that the sale was necessary to strengthen Tesla’s financial position due to COVID-19 lockdowns in China, one of its biggest markets.
Despite the significant decrease in bitcoin values over the past several months, Tesla was still able to turn a little profit on its sale of the digital currency. When bitcoin was trading for roughly $32,000 to $33,000 in January 2021, the business made its initial $1.5 billion purchase. Later, Tesla made money from selling around 10% of its assets during the first quarter.
“We converted a majority of our bitcoin holdings to fiat for a realized gain, offset by impairment charges on the remainder of our holdings, netting a $106 million cost to the P&L included within restructuring and other,” Tesla Chief Financial Officer Zach Kirkhorn said during Wednesday’s earnings call.
And Tesla’s bitcoin sale may be considered a perfectly rational strategy for obtaining money for business needs.
According to Pat Larsen, co-founder of the cryptocurrency tax accounting software company ZenLedger, “It makes perfect sense that corporate treasuries will sell liquid assets, including cryptocurrencies, confronted with falling profitability and potential layoffs.” It is not surprising that Tesla would attempt to raise capital at this time, given the stock price’s decline and the uncertain state of the economy.
Due to the sale of its bitcoin, Tesla’s cash position after the second quarter climbed to around $18.3 billion from $17.5 billion at the end of the first quarter.
As the US Congress establishes additional legislation, more businesses will likely add bitcoin to their financial holdings in the future, according to Larsen, who spoke to CoinDesk.
Gil Luria, the technology strategist at DA Davidson, stated that if we believe Musk when he says he has no regrets about selling and is willing to buy again, his opinion of bitcoin doesn’t seem to have altered.
The idea that bitcoin may be a more practical choice than cash for corporate treasury needs hasn’t changed, but it hasn’t materialized yet, according to Luria. Additionally, Luria noted that due to the current volatility in cryptocurrency pricing, “the rate of adoption by corporates isn’t going to be as swift.”
Chris Terry, vice president of enterprise solutions at open lending platform SmartFi, predicts that although skeptics will continue to stay in the background, other businesses will investigate the possibility of including bitcoin on their balance sheets. According to Terry, Tesla did better than just owning Treasury bonds since it could effectively dispose of approximately $1 billion in bitcoin.
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