Tesla’s move could prompt more corporate investments as Bitcoin’s now-proven liquidity makes it an eligible tool to effectively diversify treasury holdings
Elon Musk, the CEO of Tesla and a prominent advocate of cryptocurrency defended the electric car company’s decision to sell off 10% of its acquired Bitcoin in a tweet earlier today. The company’s decision to sell a portion of its Bitcoin surfaced after Tesla released its Q1 2021 Financial Results yesterday.
In a reply to the Founder and President of Barstool Sports, Dave Portnoy’s tweet accusing Tesla of performing a “pump and dump” operation on Bitcoin, Musk clarified that the sale of a whopping 10% of Tesla’s Bitcoin was done to prove that cryptocurrency is almost as liquid as cash.
The Tesla CEO further added that he has not sold any of his own Bitcoin, confirming for the first time the widely held speculation that Musk is a Bitcoiner.
The Financial Results report showed that the green energy company generated an income of about $101 million from the sale. Tesla had purchased Bitcoin worth more than $1 billion just a few months ago, a fact that came to light when its latest annual report filed with the SEC was made public in February.
Tesla’s investment in Bitcoin had essentially forced corporate investors to rethink the strategy of considering cryptocurrency to be too risky compared to cash, and essentially led the way for many institutional investments in digital assets, a trend that has been on a rise since 2020. Thus, it is no surprise that many in the crypto community were not happy with Tesla’s decision.
“I mean it’s obvious that Tesla likely had a risk management mandate for taking profits or losses if BTC moved by X%. Also helps that they needed profits to prop their results. But the example was MicroStrategy and Square who have both held for a while and haven’t sold,” Larry Cermak, the Director of Research at The Block said.
However, many also backed Musk’s decision, pointing out the larger implications of the move.
Meltem Demirors, Chief Strategy Officer at CoinShares, pointed out that even if the sale was done to present the company’s shareholders with a win for the quarter, the fact that Tesla could sell such a large amount of Bitcoin easily and quickly indicates that the Bitcoin market structure and depth are ‘very robust’.
She added that this will act as an example to show that “corporate treasurers can tick off sufficient liquidity when looking at Bitcoin to effectively diversify treasury holdings,” and thus prompt more corporate investments into digital assets.