Disclaimer: Information found on CryptoreNews is those of writers quoted. It does not represent the opinions of CryptoreNews on whether to sell, buy or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk.
CryptoreNews covers fintech, blockchain and Bitcoin bringing you the latest crypto news and analyses on the future of money.
Bitcoin (BTC) has appreciated by more than 50% since Tesla announced its approximately $1 billion in BTC sales in July 2022. Consequently, the electric vehicle manufacturer owned by Elon Musk would have realized an additional $500 million had it waited to sell until today.
Are Tesla’s Bitcoin trades profitable?
Tesla famously liquidated nearly $936 million of its total Bitcoin holdings in Q2 2022, representing 75% of its remaining reserves, to secure a $64 million profit. At that time, Bitcoin was trading approximately 70% lower than its all-time high of $69,000 recorded in November 2021.
BTC/USD monthly price chart featuring Tesla’s Bitcoin sales, purchases, and sales. Source: TradingView
Initially, Tesla purchased $1.50 billion worth of Bitcoin in February 2021 at an average price of $36,000. The company subsequently sold BTC worth $272 million to enhance its Q1 2021 accounting by $101 million.
Despite Bitcoin prices hitting bear-market lows of approximately $16,000 at the time, Tesla retained its remaining BTC through Q4 2022. Currently, Tesla holds 10,725 BTC, valued at around $330 million, which is nearly 15% below the acquisition value from February 2021.
In total, Tesla generated approximately $165 million in profit from two separate Bitcoin sales. As of April 14, the company faces an unrealized loss of around $56.6 million on its remaining BTC holdings, while its net profit to date stands at approximately $108 million.
Related Posts
Will Tesla dump its remaining BTC holdings?
Notably, Tesla’s previous Bitcoin sales were driven by weaker free cash flows. For instance, the Q1 2021 BTC sale worth $272 million accounted for nearly 93% of Tesla’s free cash flows during that quarter.
Tesla free cash flows performance by quarter. Source: Statista
Similarly, Tesla’s Bitcoin sales in Q2 2022 occurred as its free cash flows declined by 73% compared to the previous quarter. Both sales suggest that Musk utilized Bitcoin as a hedge during periods of cash constraints at Tesla.
The Tesla CEO explained at the time that the sale was intended 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 would reach nearly $2 billion, a 40% increase from the previous quarter. This improvement should reduce the likelihood of Tesla liquidating a significant portion of its Bitcoin holdings in the near term.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
