Tesla converted 75% of bitcoin purchases to fiat currency in Q2 2022

Early last year, Tesla invested $1.5 billion in bitcoin, betting on what the electric car maker called the digital currency’s “long-term potential.” The company has already sold three quarters of its holdings.

“As of the end of Q2, we have converted approximately 75% of our Bitcoin purchases to fiat currency,” Tesla said in its second-quarter earnings call on Wednesday. The company said those sales added $936 million in cash to its balance sheet.

It’s a quick haven for Tesla and CEO Elon Musk, who was a strong crypto booster during last year’s run-up, tweeting frequently about various digital currencies. The price of bitcoin has lost half of its value in the past four months during what has been called a “crypto winter.”

For Tesla, the fair market value of its bitcoin holdings reached $2.48 billion in the first quarter of 2021 and ended the year at around $2 billion. The company did not say at what price it sold or give the size of the decline, but bitcoin started the second quarter near $46,000 and ended below $19,000.

Analyst Brian Johnson at Barclays estimated earlier this week that Tesla would see a bitcoin-related write-down of $460 million given the sale.

“The reason we sold a bunch of our bitcoin holdings was because we were uncertain when the Covid shutdowns in China would ease, so it was important for us to maximize our cash position,” Musk said in an earnings call on Wednesday. “This should not be taken as a judgment on bitcoin,” he said, adding that Tesla is open to increasing its crypto holdings in the future

But when asked about bitcoin’s potential as an earnings call inflation hedge, Musk said Tesla’s main goal is to accelerate the transition to sustainable energy, calling bitcoin “a sideshow to a sideshow.”

In the first quarter of 2021, when Tesla went big on bitcoin, the company said the decision was a matter of becoming more flexible, diversifying and extracting returns from its cash holdings. The company quickly sold 10% when the currency ran up, contributing $101 million in profit during the period.

Kirkhorn said at the time that the company’s intention was “to hold what we have for the long term and continue to accumulate Bitcoin from transactions from our customers when they purchase vehicles.”

Last May, Musk said Tesla would do it stop accepting bitcoin for car purchases because of the environmental impact of mining, but he added that the company “will not sell any bitcoin.” A week later, he tweeted emojis indicating the company has “diamond hands” when it comes to bitcoin investments, crediting “our coin master.”

A lot can change in a year.

— CNBC’s Lora Kolodny contributed to this report.

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