Tesla’s decision to sell off its Bitcoin holdings has resulted in a missed opportunity to make over $300 million in profits. The company initially invested $1.5 billion in Bitcoin in February 2021 when the price was around $36,000.
Since then, Tesla’s stock price has dropped by about 40% compared to Bitcoin, while Bitcoin itself has seen a 7.39% increase against the USD. If Tesla had held onto its entire Bitcoin investment, it could have made a hypothetical profit of over $300 million, considering the current Bitcoin value of around $41,500.
However, Tesla did sell about 10% of its holdings in March 2021 and approximately 75% in the second quarter of 2022. Tesla CEO Elon Musk explained that these sales were meant to demonstrate Bitcoin’s liquidity and strengthen Tesla’s balance sheet during uncertain financial times.
Despite these sales, Tesla still holds around 9,720 BTC, reflecting a more conservative approach in what traders believe will be a bullish year for Bitcoin.
Interestingly, Tesla’s previous Bitcoin sales coincided with weaker free cash flows. In the first quarter of 2021, the sale of Bitcoin accounted for 93% of Tesla’s free cash flows during that period. In Q2 2022, Tesla’s Bitcoin sales coincided with a 73% reduction in free cash flows.
However, Tesla’s free cash flows have been increasing throughout 2023, which means Musk may not need to rely on Bitcoin to bolster finances during tighter cash periods. In Q4 2023, Tesla’s free cash flow was strong at $2.1 billion, contributing to a total of $4.4 billion for the year.
Analysts predict that Bitcoin’s value will rise in 2024, citing the approval of spot Bitcoin exchange-traded funds in the US and the upcoming Bitcoin halving event as key drivers behind their optimistic forecasts.
It’s important to note that this article does not provide investment advice or recommendations. It’s always crucial for readers to conduct their own research and make informed decisions when it comes to investments and trading.