Tesla rocked the cryptocurrency markets when it announced it had bought $1.5B worth of Bitcoin back in February 2021. Today, Tesla rocked the crypto world again, when it announced in its quarterly earnings that it had sold a portion of its Bitcoin holdings, and as a result, reported yet another profitable quarter.
But this is not all bad news. In fact, Tesla’s liquidation of their Bitcoin holdings represented only 10% of their stash, and they still hold 90% of their bitcoin. Their experiment in selling the bitcoin was to prove liquidity and that their strategy of holding Bitcoin as a treasury holding alternative to cash was a sound one, and that if they required working capital, it was possible to get cash for it.
Will this help alleviate some of the concerns other companies may have about the liquidity of Bitcoin, and in the long run help onboard more institutions onto the Bitcoin train? Only time will tell.
Allocating some of their treasury and cash on hand into bitcoin is something companies are actively thinking about, ever since Michael Saylor did that exact same thing for MicroStrategy, but with that, comes questions of when they need the funds, will it be easy to liquidate them for cash? That was the question Tesla answered in their quarterly earnings.
Now that companies have seen how easy it is to enter and exit into bitcoin positions, I think over the next few quarters, we will start to see a lot more companies having more confidence to enter into the bitcoin market.
Thus far, no other major corporations have revealed major holdings in Bitcoin or other crypto, but as we head into a huge earnings week, this may change. As it is, we just heard from JP Morgan, yes, that same JP Morgan that has derided Bitcoin for years, that they are preparing for the launch of a JP Morgan managed bitcoin fund that they will offer to their private wealth clients, later this year.
We’ve just seen Bitcoin pull back from a new high of $64K back down to $49K, with a recovery just yesterday bringing it back to $53K. It’s tough seeing such a pullback, and anyone happy about it is probably not telling the whole truth. That said, this pullback should be a healthy one in the long run, given we’ve had 6 consecutive months of gains, and this correction will tame the euphoria and ensure we can maintain a sustainable momentum in this bull cycle.
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