Bitcoin (BTC) prices have risen by more than 50% since Tesla announced a BTC sale worth approximately $1 billion in July 2022. In other words, Elon Musk’s electric car maker will be able to earn more. If you waited until today to make $500 million selling that bitcoin.
Is Tesla’s Bitcoin Sale Profitable?
Tesla dumped nearly $936 million of its total Bitcoin in the second quarter of 2022, accounting for 75% of the company’s reserves at the time, and made a profit of $64 million. At the time, bitcoin was trading about 70% below its November 2021 all-time high of $69,000.
The monthly BTC/USD price chart depicts Tesla’s Bitcoin buy and sell transactions. Source: TradingView
Initially, Tesla Bought $1.5 billion worth of Bitcoin in February 2021 The average price is $36,000. The company then sold $272 million worth of BTC, raising $101 million on its Q1 2021 balance sheet.
However, the company is holding on to the remaining BTC through the fourth quarter of 2022, even as the price of bitcoin hit its nadir in the bear market, when it fell to around $16,000. Currently, Tesla holds 10,725 BTC, worth approximately $330 million, nearly 15% below the value of its February 2021 purchase.
Overall, Tesla made about $165 million in profits from two separate bitcoin sales. As of April 14, the remaining BTC holdings faced an unrealized loss of approximately $56.6 million, compared to a net profit of approximately $108 million to date.
Will Tesla sell all remaining BTC?
Interestingly, Tesla previously sold Bitcoin due to weaker free cash flow. For example, BTC sales worth $272 million in the first quarter of 2021 accounted for nearly 93% of Tesla’s free cash flow for the same quarter.
Tesla’s free cash flow performance by quarter. Source: Statista
Likewise, Tesla’s Bitcoin sales for Q2 2022 come amid a 73% drop in its free cash flow from the previous quarter. Both transactions show Musk’s reliance on bitcoin as a safe haven during Tesla’s cash crunch.
The Tesla CEO at the time explained that the sale of BTC was to “demonstrate Bitcoin’s liquidity as a substitute for cash held on the balance sheet.”
Meanwhile, Wall Street analysts estimate that Tesla’s free cash flow in the first quarter of 2023 could reach nearly $2 billion, a 40% quarter-on-quarter increase. This will reduce the likelihood that Tesla will release any bitcoins in the short term.
- Tesla and Bitcoin: From $1.5 billion to $225 million.
- Jim Cramer recommends selling Bitcoin and misses out on 30% MTD profit.
As reported by Cointelegraph