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Electric car maker Tesla (TSLA) sold over $936 million of bitcoin (BTC) in the second quarter amid a broad crypto-market decline and weakening economic conditions. That sale led to generally positive reactions among the retail crypto community. However, institutional crypto traders were less sanguine.
During the company's earnings call, CEO Elon Musk said Tesla wanted to maximize its cash position amid the “uncertainty of the COVID-19 lockdowns in China.” Tesla recorded a $64 million gain on the sale.
Institutional crypto traders had mixed views about the move. Some said it was justified given Tesla’s business interests; others said the decision could influence market participants.
“The Tesla news is indeed a bearish headline, but not completely unexpected,” Katie Talati, director of research at Arca, told CoinDesk. According to its filings, Tesla “sold their BTC reserves at about $29K over the past quarter as a way to have positive free cash flow. Without this, they would have reported cashflow negative results.”
Talati said the news was “not a knock on the fundamental thesis for bitcoin” but had more to do with Tesla's treasury-management strategy during an overall down market.
“In the long run this shouldn't matter as the success of BTC depends on adoption across many corporates, individuals, and governments, not just one company,” she said.
Vadym Synegin, vice president at Web3 ecosystem WeWay, took the opposing view. The sales came “against Tesla’s initial plans to hold the premier coin for the long term,” he told CoinDesk. Bitcoin, the largest cryptocurrency by market cap, was used “as a sacrifice” because the company had to bolster its cash position and performance in one of its most difficult quarters.
“Tesla said it is open to buying more bitcoin in the future, but industry stakeholders may not be pleased with the idea, seeing the instability the firm can wield,” Synegin said. “Its influence is huge in the industry.”
“While every firm has its corporate strategy, the Tesla sell-off might trigger some to reconsider their positions in both the short and long term, respectively,” he said.
Anton Gulin, business director at AAX Exchange, shared that view. While the sales were for “pure risk management and a desire to please investors before reporting” company earnings, retail investors take such actions seriously, he said.
“From an ethical point of view, Musk's actions and statements have already become a meme in their own right and are challenging to take seriously,” Gulin told CoinDesk. “It is just another example and indicator of why you should think with your head and not look for idols.”