Elon Musk's Tesla makes multi-billion-dollar bitcoin misstep in sell off at one of the worst possible times
The company's digital assets are currently valued at $US1.24 billion ($1.8 billion).
That's up substantially from $US722 million a year ago. But anyone who's been following the crypto market knows that the figure represents a lost opportunity amounting to billions of dollars in missed gains for the electric vehicle maker.
Bitcoin is trading near a record and is up 80 per cent over the past year. Tesla sold 75 per cent of its holdings in mid-2022, when the digital currency was trading at a fraction of its current price.
While chief executive Elon Musk has made clear that the future of his electric vehicle company is about robotaxis and humanoid robots — not about crypto investments — the business in its current form is struggling and could use the cash boost.
Tesla reported a second straight drop in auto revenue in its earnings report late Wednesday, and came up short of Wall Street estimates. The stock plunged 8 per cent on Thursday and is now down about 25 per cent for the year, by far the biggest drop among tech's megacaps.
Robotaxis and Optimus robots are huge and costly bets for Mr Musk in markets with stiff competition and ever-changing dynamics. Tesla has also acknowledged that US President Donald Trump's tariffs and the expiration of federal EV tax credits could hurt the company's core business in the coming quarters.
Tesla's digital assets, meanwhile, are bolstering profitability. Gains from bitcoin in the second quarter amounted to $US284 million in a period when total net income was $US1.17 billion.
The gains could have been much greater.
In early 2021, Tesla invested $US1.5 billion in bitcoin, banking on what the EV company called the digital currency's 'long-term potential' and to add 'more flexibility to further diversify and maximise returns on our cash.'
Mr Musk had become a loud proponent of bitcoin online, and in January of that year, the currency skyrocketed 20 per cent in a day after the Tesla CEO added #bitcoin to his bio on Twitter, now X.
By mid-2022, the world was in a much different place. The COVID-era boom was gone, replaced by soaring inflation and rising interest rates, an equation that pushed investors out of risky assets.
Tesla said in the second quarter of that year that it sold three-quarters of its bitcoin holdings, adding cash to its balance sheet at a time when equity and crypto markets were simultaneously plunging. Tesla lost about two-thirds of its market cap in 2022, and bitcoin fell by 60 per cent.
However, bitcoin has rebounded sharply since then, getting an added boost this year from the Trump Administration's efforts to loosen regulations and its promise to create a strategic bitcoin reserve.
Bitcoin is currently trading at over $US119,000, up about sixfold from the end of the second quarter of 2022, the period when Tesla made its big move out.
Had Tesla held on to all of its bitcoin, that stash would be worth roughly $US5 billion, based on estimates of how much Tesla bought in 2021, instead of $US1.24 billion. The $936 million worth of bitcoin the company converted to cash would currently be valued at over $US3.5 billion.
Tesla didn't respond to a request for comment.
As for Mr Musk, he's hardly said anything about bitcoin on his social network X in the past three years. In March 2022, shortly before Tesla began dumping bitcoin, he wrote regarding cryptocurrencies, 'I still own & won't sell my Bitcoin, Ethereum or Doge fwiw.'
— CNBC's Lora Kolodny contributed to this report.
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