Tesla sells 10% of its Bitcoin holdings, Elon Musk: Only to prove liquidity, personally hasn't sold any Bitcoin

In February of this year, Tesla bought $1.5 billion worth of Bitcoin and announced that it would accept Bitcoin as payment. During an investor call discussing the first-quarter earnings, Tesla revealed that it had sold some of its Bitcoin holdings, expressing astonishment at its liquidity. Founder Elon Musk also shared his thoughts on Twitter.

How much Bitcoin did Tesla sell?

According to the investor call report, Tesla sold about 10% of its Bitcoin holdings in the first quarter, generating $272 million in revenue and a profit of $101 million. In early February, it was reported that Tesla purchased 48,000 Bitcoins at an average price of around $31,250. From this, we can infer:

• The number of Bitcoins Tesla may have sold is 4,800 (10% of the initial purchase).
• The average selling price is approximately $56,666 ($272 million / 4,800 Bitcoins).
• The profit margin is about 81%.
• Tesla still holds 43,200 Bitcoins, accounting for 0.205% of the total circulation.

In the financial report, Tesla stated that the remaining digital asset value as of March 31 was $1.331 billion, significantly different from the actual Bitcoin holding value due to accounting regulations that prevent revenue recognition. For more details, review: What concerns might arise from Tesla's Bitcoin investment? Perspectives from "Write Some Popular Science" and "Stock Cancer."

Testing Bitcoin Liquidity

It was previously reported that American stock influencer and day trader Dave Portnoy entered the cryptocurrency market at the end of last year's DeFi boom. After suffering losses, he announced his exit from the crypto market within a few days.

However, following the news of Tesla selling a portion of its Bitcoin holdings, he revealed that he still holds Bitcoin and tweeted:

So am I understanding this correctly now? Musk bought Bitcoin, pumped it, sold it, and made a big profit. Listen up, I still have a Bitcoin. Bitcoin is exactly what we thought it was. Don't be the last one to get on board.

No, you do not. I have not sold any of my Bitcoin. Tesla sold 10% of its holdings essentially to prove liquidity of Bitcoin as an alternative to holding cash on balance sheet.

— Elon Musk (@elonmusk) April 26, 2021

Musk replied in the comments:

No, you don't understand. I haven't sold any of my Bitcoin holdings. Tesla sold 10% of its holdings just to prove Bitcoin's liquidity as an alternative cash asset on the balance sheet.

Why is this a positive development?

The Block's Director of Research, Larry Cermak, revealed more details from the conference call. Zach Kirkhorn, Tesla's CFO whose title was changed to "Master of Coin," stated in March:

Tesla is focusing on the development of the crypto market. From a corporate finance perspective, we are quite satisfied with Bitcoin market liquidity and believe in Bitcoin's long-term value. Therefore, Tesla will focus on holding our long-term assets and continue to accumulate Bitcoin from transactions of vehicle purchases by customers.

He believes that Bitcoin has proven itself to be an excellent way to store non-day-to-day cash and make some returns. There are many reasons to be optimistic about this, and Tesla will closely monitor the situation.