Elon Musk dismisses crypto as a ‘sideshow’—but is open to buying more Bitcoin sometime
Tesla may have just dumped 75% of its Bitcoin and admitted to losing tens of millions of dollars on its investment in the cryptocurrency, but Elon Musk says the electric carmaker isn’t finished with cryptocurrency.
“We are certainly open to increasing our Bitcoin holdings in future,” said Musk on an earnings call with analysts on Wednesday. But the Tesla CEO, who at times has been one of cryptocurrency’s most vocal bulls, downplayed the role of digital assets in Tesla’s business. Tesla’s main goal is to speed up the transition to renewable energy, which makes cryptocurrency a “sideshow to the sideshow,” and “not something we think about a lot,” Musk said.
In February 2021, the electric carmaker disclosed that it owned $1.5 billion worth of Bitcoin, stating in a filing with the U.S. Securities and Exchange Commission that the purchase would help “further diversify and maximize returns on our cash.”
Tesla sold 10% of its Bitcoin in April 2021, but did not issue any more disclosures about crypto sales until its earnings report on Wednesday, when it announced it had sold 75% of its remaining Bitcoin.
Bitcoin and the broader crypto market have crashed in recent months, due to the collapse of high-profile projects like the TerraUSD stablecoin, crypto hedge fund Three Arrows Capital, and crypto lender Celsius Network. Increasing interest rates also drove traders away from cryptocurrencies toward safer assets. Bitcoin is down 51.9% for the year.
Did Tesla lose money on Bitcoin?
Tesla’s shareholder presentation says the carmaker sold 75% of its “Bitcoin purchases” for $936 million. On Wednesday’s earnings call, Tesla CFO Zachary Kirkhorn said that the company sold the Bitcoin for “a realized gain,” meaning that Tesla sold the Bitcoin at a higher price than what it paid for it.
Yet the carmaker also admitted that the Bitcoin it still owns is now worth much less than what it paid for it—and that the decline is large enough to offset the sum Tesla gained from its Bitcoin sale. Kirkhorn said that the net result was a “$106 million cost” to the carmaker’s bottom line.
Why did Tesla sell its Bitcoin?
Musk said Tesla’s decision to sell its Bitcoin was not due to the declining value of the cryptocurrency; rather, he blamed China and its COVID lockdowns.
Tesla’s Bitcoin sale “should not be taken as some verdict on Bitcoin. It’s just that we were concerned about overall liquidity of the company given shutdowns in China,” Musk said.
Shanghai’s two-month COVID lockdown wreaked havoc on Tesla’s operations. Tesla’s Shanghai Gigafactory was briefly closed as workers were told to stay home to avoid spreading the coronavirus. Even when the factory was allowed to reopen under a closed-loop system that forced workers to live on-site in military-style barracks, Tesla struggled with both parts shortages and shipping disruptions. Production and deliveries fell far short of the manufacturer’s targets.
On July 2, the company reported its first-ever decline in quarterly vehicle sales, which the company attributed to the disruption in Shanghai.
Tesla’s Dogecoin holdings
Musk also disclosed for the first time on Wednesday’s earnings call that Tesla owns Dogecoin, noting that the company hadn’t sold any of the dog-themed meme coin it holds. In the past, Musk has mentioned that he owns Dogecoin personally, and has promoted the currency on his Twitter account. Tesla accepts the currency for some merchandise, but not for vehicles.
Tesla briefly accepted Bitcoin for vehicle purchases, but stopped the practice in May 2021 due to concerns about the environmental toll of Bitcoin mining.
Tesla shares jumped 1.5% in after-hours trading, after the carmaker reported a second-quarter profit that beat analyst expectations. Tesla’s Wednesday earnings report did feature its first sequential quarter-on-quarter decline in profit, which Musk blamed on “supply-chain hell,” such as factory shutdowns, supply-chain disruption, and the chip shortage.
Tesla’s disclosure that it offloaded Bitcoin erased the coin’s gains on Wednesday. Bitcoin is down 2.7% to reach $22,753, as of noon Hong Kong time. Dogecoin also reversed gains today, sinking 3.0% to hit $0.07. The meme coin is down 64% for the year.