Tesla’s Bitcoin Sales Cost Company Over $300 Million in Potential Profits

Tesla’s decision to divest its Bitcoin holdings has led to a missed opportunity of over $300 million in potential profits.

The electric vehicle company initially entered the world of cryptocurrency in February 2021 with a groundbreaking investment of $1.5 billion when Bitcoin’s price was approximately $36,000.

Since Tesla’s first reported Bitcoin balance on February 8, 2021, the company’s stock price has decreased by about 40% compared to Bitcoin’s performance.

Specifically, Tesla’s stock (TSLA) has underperformed Bitcoin (BTC) by 40.1%, while Bitcoin itself has appreciated by 7.39% against the US dollar, and Tesla’s stock has declined by 35.7% against the US dollar.

Tesla’s approach took an unexpected turn when the company sold roughly 10% of its Bitcoin holdings in March 2021 and around 75% in the second quarter of 2022.

Elon Musk, Tesla’s CEO, explained that these sales aimed to showcase Bitcoin’s liquidity and strengthen Tesla’s financial position during uncertain times.

Had Tesla retained its entire Bitcoin investment, it could have realized a hypothetical profit exceeding $300 million, given Bitcoin’s current value of around $41,500.

READ MORE: US Government Plans to Sell $118 Million Worth of Seized Silk Road Bitcoin

However, Tesla has maintained its remaining Bitcoin holdings, estimated at approximately 9,720 BTC, in recent quarters, signaling a more conservative strategy in anticipation of a bullish year for Bitcoin.

Interestingly, Tesla’s previous Bitcoin sales coincided with quarters where the company reported weaker free cash flows, which represent the cash generated after covering operational expenses.

For instance, in the first quarter of 2021, Tesla’s $272 million Bitcoin sale accounted for a staggering 93% of the company’s free cash flows during that period.

Similarly, in Q2 2022, the 73% reduction in free cash flows aligned with Tesla’s Bitcoin sales. It appears that Musk relied on Bitcoin to boost finances during Tesla’s financially constrained periods.

However, the situation may change, as Tesla’s free cash flows have been on the rise throughout 2023. In Q4 2023, Tesla’s free cash flow was a robust $2.1 billion, contributing to a total of $4.4 billion for the year.

Many analysts predict a potential increase in Bitcoin’s value in 2024, citing the approval of spot Bitcoin exchange-traded funds in the United States and the expected impact of the upcoming Bitcoin halving event as key factors driving their optimism.

Tesla’s decision regarding its remaining Bitcoin holdings may be influenced by its improving financial outlook and the evolving cryptocurrency landscape.

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