Bitcoin Falls 6.4% on News That Musk's Tesla Sold 75% of Its BTC Last Quarter

Tesla stated as recently as March 2022 that it believed in the "long-term potential" of Bitcoin.

In a tweet last May to his nearly 102 million Twitter followers, Tesla CEO Elon Musk stated that his company had "diamond hands" -- which in crypto speak was intended to mean that Tesla planned to hold onto its $1.5 billion worth of Bitcoin (BTC) indefinitely.

So much for those so-called diamond hands, as it became public during Tesla's second-quarter earnings call yesterday that the company dumped the majority of its Bitcoin holdings for cash. "As of the end of Q2, we have converted approximately 75% of our Bitcoin purchases into fiat currency," Tesla stated in its second-quarter earnings announcement.

The company went on to confirm that its disposition of those Bitcoin added $936 million worth of cash to its balance sheet, but Tesla did not disclose whether those aggregated proceeds resulted in a profit or a loss. Ironically, as recently as March 2022, Tesla stated during its first-quarter earnings announcement that it was committed to holding its crypto portfolio. "We believe in the long-term potential of digital assets both as an investment and also as a liquid alternative to cash."

As of this writing, the price of BTC dropped nearly 6.5%, trading as low as $22,650 on cryptocurrency exchanges, down from its five-week high of $24,196 according to CoinMarketCap.

"The reason we sold a bunch of our Bitcoin holdings was that we were uncertain as to when the COVID lockdowns in China would alleviate so it was important for us to maximize our cash position," Musk was quoted as saying in a transcript of the company's earnings call on Wednesday. "This should be not taken as some verdict on Bitcoin," he said, adding that Tesla is open to increasing its crypto holdings in the future.

Is Bitcoin a buy?

Founded in 2008, and originally conceptualized as a peer-to-peer payment alternative to government fiat currencies, Bitcoin has largely been repositioned as a store of value and a strong inflation hedge for more than a decade. However, that thesis has broken down since Bitcoin's price peak of $68,789 per coin set on Nov. 10, 2021. Bitcoin has fallen 67% from that all-time high, while U.S. inflation has increased more than 5% each month for more than a year.

Investors should be comfortable with the risk and funding amounts they plan to use for their crypto investments, and should always do their due diligence on any asset they plan to bankroll. While not financial advice, the underlying fundamentals of Bitcoin have not changed -- just its price. Now might be a good time to start dollar-cost averaging to take advantage of this high-quality crypto that's hovering in a deeply-discounted price range.