Tesla’s Bitcoin Blunder: When Timing Matters
Tesla’s remaining Bitcoin stash has grown 100% from its November 2022 lows, demonstrating that hodling BTC can indeed pay off. The price of Bitcoin has grown by more than 50% since Tesla unveiled its approximately $1-billion BTC sales in July 2022. In other words, the Elon Musk-owned electric carmaker would have made an additional $500 million if it had waited until today to sell.
Are Tesla’s Bitcoin Trades Profitable?
Tesla infamously dumped nearly $936 million of its total Bitcoin holdings in Q2 2022, accounting for 75% of its remaining reserves, to secure $64 million in profit. At the time, Bitcoin was trading about 70% lower than its record high of $69,000 in November 2021. Originally, Tesla purchased $1.5 billion worth of Bitcoin in February 2021 at an average price of $36,000. The company then sold BTC worth $272 million to boost its Q1 2021 accounting by $101 million.
The company has nevertheless held on to its remaining BTC as of Q4 2022 despite the price of Bitcoin sitting at bear-market lows of around $16,000 at the time. Today, Tesla holds 10,725 BTC worth around $330 million, almost 15% below the procurement value from February 2021. Overall, Tesla made roughly $165 million in profit from two separate Bitcoin sales. As of April 14, it sits atop an unrealized loss of around $56.6 million on its remaining BTC holdings, while its net profit to date sits at around $108 million.
Will Tesla Dump Its Remaining BTC Holdings?
Interestingly, Tesla’s previous Bitcoin sales came from weaker free cash flows. For instance, the Q1 2021’s BTC sale worth $272 million made up nearly 93% of Tesla’s free cash flows in the same quarter. Similarly, Tesla’s Bitcoin sales in Q2 2022 came as its free cash flows declined 73% versus the previous quarter. Both sales suggest that Musk relied on Bitcoin as a haven during Tesla’s cash crunch phases.
The Tesla CEO explained at the time that the sale was made to “prove liquidity of Bitcoin as an alternative to holding cash on a balance sheet.”
Meanwhile, Wall Street analysts estimate that Tesla’s free cash flow in Q1 2023 could be nearly $2 billion, up 40% versus the previous quarter. This should reduce the chances of Tesla dumping any significant Bitcoin amount in the near term.
