Last week, Tesla made headlines with its quarterly when CEO Elon Musk revealed that the company has sold 75% of its Bitcoins (quotation BTC) which it originally bought in January 2021.
At the time, Musk announced on Twitter that the company had bought $ 1,5 billion worth of Bitcoin as an alternative to holding cash. But now that same Bitcoin has been sold, as Tesla faced an uncertain production environment in its Chinese markets.
Due to the prolonged closures of the Shanghai factory by COVID-19, Tesla's production was severely damaged in the second quarter. In the midst of the lockouts, Tesla executives had no idea when it would end or when employees could return to work. As a result, the company needed additional liquidity to make sure it could overcome any obstacles related to lockouts. To build a cash reserve, the company decided to sell three-quarters of its Bitcoins.
Based on information in the earnings report, Tesla appears to have sold in May, when the price of Bitcoin was around $ 30.000. By selling at that time and not at the peak of Bitcoin, which fell as low as $ 19.000, Tesla limited the losses he would have suffered if he had waited any longer.
The sale added nearly $ 950 million to Tesla's balance sheet. Had the company sold closer to the Bitcoin price of $ 20.000, that figure could have dropped 30% to something like $ 650 million. At a time when every dollar matters, Tesla averted the worst of Bitcoin's decline and added a liquidity buffer should the situation in China worsen.
Why you shouldn't follow Elon this time
Unless you're short on cash and need to run an international business like Tesla, I don't recommend selling your Bitcoin. If anything, it could be a great time to buy.
One of the most reliable technical indicators of Bitcoin is the 200-week moving average (WMA). Only twice did the price of Bitcoin fall below the 200 WMA line: in the fall of 2015 and the collapse of COVID-19 in March 2020. In hindsight, both periods represented buying opportunities that occurred. only rarely occur. Bitcoin is now in a similar territory to that of 2015 and 2020. Around mid-June, the price plunged below the WMA 200 and remained there for nearly a month. It has only recently risen, but only for a few days before falling below again.
If the technical indicators aren't enough for you to keep holding your Bitcoin, we can learn more about the comments made by Musk during the same earnings call. After commenting on the sale, Musk said the decision "should not be taken as a verdict on Bitcoin" and that the company will look to increase Bitcoin holdings in the future.
It looks like Musk and Tesla are still interested. While current factors surrounding the company may not allow Tesla to add the remaining 10.000 bitcoins right away, Musk's comments indicate that he still appears to believe in the original cryptocurrency.
