Tesla’s decision to sell a portion of its Bitcoin holdings has cost the company over $300 million in potential profits, according to reports.
In February 2021, Tesla made waves by investing $1.5 billion in Bitcoin when its price was around $36,000. However, since then, Tesla’s stock price has fallen by 40% compared to Bitcoin.
In March 2021, Tesla sold about 10% of its Bitcoin holdings, and in the second quarter of 2022, the company sold approximately 75% of its reserves. Tesla CEO Elon Musk explained that these sales were meant to showcase Bitcoin’s liquidity and strengthen Tesla’s balance sheet during uncertain times.
If Tesla had held onto its entire Bitcoin investment, it could have made a hypothetical profit of over $300 million, given Bitcoin’s current value of around $41,500.
Despite the sales, Tesla still holds around 9,720 BTC, indicating a more conservative approach in what traders predict to be a bullish year for Bitcoin.
The timing of Tesla’s previous Bitcoin sales coincided with quarters where the company reported weaker free cash flows, which are the funds generated after business expenses. For example, in Q1 2021, Tesla’s Bitcoin sales constituted 93% of its free cash flows during that period.
However, as Tesla’s free cash flows have improved throughout 2023, it may not need to rely on Bitcoin to bolster its finances during tight cash periods. In Q4 2023, Tesla’s free cash flow was $2.1 billion, contributing to a total of $4.4 billion for the year.
Analysts are optimistic about Bitcoin’s future, with many predicting a rise in its value in 2024. They attribute this optimism to the approval of spot Bitcoin exchange-traded funds in the US and the upcoming Bitcoin halving event.
It’s important to note that this article does not provide investment advice. Readers should conduct their own research and assess the risks before making any investment or trading decisions.