Due to Tesla’s reluctance to “hodl” Bitcoin, over $300 million in potential revenues were lost.
With a historic $1.5 billion investment, Tesla made its first step into the Bitcoin market in February 2021.The cost of Bitcoin was approximately $36,000 at the time.Compared to Bitcoin, Tesla’s stock price has decreased by over 40% since the initial BTC amount was disclosed on February 8, 2021.
But in an unexpected move, Tesla sold almost 10% of its shares in March 2021.Then, in 2022’s second quarter, the business sold about 75% of its reserves of Bitcoin.These sales, as Tesla CEO Elon Musk pointed out, were meant to support Tesla’s balance sheet in tumultuous financial times and to show the liquidity of Bitcoin.With the current value of Bitcoin at over $41,500, Tesla might have made a profit of almost $300 million if it had kept its full investment in the cryptocurrency.
However, the company’s remaining Bitcoin holdings, which are believed to be worth 9,720 BTC, have not changed over the past several quarters, indicating a more cautious attitude in what market observers believe will be a positive year for Bitcoin.
It’s interesting to note that Tesla’s earlier Bitcoin sales coincided with periods with lower free cash flows.It is the money left over after a corporation pays for the expenses necessary to keep up or expand its operations.For instance, Tesla’s $272 million Bitcoin transaction in the first quarter of 2021 accounted for a startling 93% of the company’s free cash flows at that time.
Similarly, in Q2 2022, Tesla’s 73% reduction in free cash flows coincided with its Bitcoin sales.
To put it plainly, Musk relied on Bitcoin to support his finances when Tesla was experiencing cash flow issues.He might not need to use the same approach right now, though, considering Tesla’s projected growth in free cash flows through 2023.For instance, Tesla’s free cash flow in Q4 2023 was robust at $2.1 billion, helping the company earn $4.4 billion for the year.
A number of analysts predict that the value of Bitcoin will increase in 2024. They attribute their confidence to the US government’s approval of spot Bitcoin exchange-traded funds as well as the expected effects of the impending Bitcoin halving event.