It is well known that Tesla Inc. CEO Elon Musk is a huge cryptocurrency proponent. From allowing customers to buy Tesla cars with Dogecoin (DOGE) to seemingly incessant support on social media, Musk has made his adoration for crypto known over the years. However, Musk and Tesla showed that some actions speak louder than words.
In February 2021, the company made a landmark investment of $1.5 billion in Bitcoin. The investment was meant to earn extra returns on cash that would have earned little to no interest otherwise. At the time of the announcement, Bitcoin’s price was hovering around $37,000. However, the price quickly spiked to over $50,000 on the news.
In March 2021, Bitcoin rose to a price above $60,000, reaching an all-time high. Because of this, Tesla decided to sell roughly 10% of its Bitcoin holdings for a sizable gain. Specifically, it sold 4,320 Bitcoins to receive net proceeds of over $250 million. Tesla’s stock price fell around 20% in the same timeframe.
Tesla continued to hold nearly 40,000 Bitcoins throughout the rest of 2021 and into 2022. However, in June 2022, it sold a large portion of its holdings. These sales totaled nearly 30,000 Bitcoins or about 75% of its total holdings. According to Musk, the sale was intended to show Bitcoin’s liquidity and ability to support large transactions and give Tesla some extra cash in the event of an economic downturn.
The sale was untimely, as Bitcoin was trading below $20,000, hitting 18-month lows. While the price of Bitcoin continued to fall throughout the rest of 2022, Bitcoin did extremely well in 2023, appreciating nearly 150% and reversing the difficulties seen in 2022.
Because of this, one can’t help but wonder how much Tesla’s huge Bitcoin portfolio could have been worth if it had not sold. At the beginning of 2024, just before the approval of the spot Bitcoin exchange-traded funds (ETFs), the price of Bitcoin briefly surpassed $47,000. If Tesla had held onto its original investment of 43,200 Bitcoins, it would have been worth just over $2 billion at $47,000 per Bitcoin.
This means that Tesla missed out on an extra $500 million in profit had it not sold its Bitcoin in March 2021 and June 2022.
Tesla still holds 9,720 Bitcoins, worth around $400 million at current prices. It will be interesting to see whether it holds on to the tokens in 2024 or sells. In the past, sales of Bitcoin have come when the price rises to new highs or when Tesla is in a tough spot financially. For the first case, some experts believe that Bitcoin could have a strong 2024 and potentially reach new all-time highs, which could spark a sale of Bitcoin. Conversely, Tesla has not had many issues with cash recently, and a soft landing is looking to be more feasible, giving reason to believe that Tesla could continue holding on to its Bitcoin reserves.
Either way, it will be interesting to see what 2024 has in store for Bitcoin, Tesla and Tesla’s Bitcoin holdings.
