The price of Bitcoin (BTC) has increased by over 50% since Tesla announced its purchase of approximately $1 billion worth of BTC in July 2022. This means that if Tesla had sold their BTC today, they would have made an additional $500 million.
Are Tesla’s Bitcoin trades profitable?
In Q2 2022, Tesla infamously sold almost $936 million of its total Bitcoin holdings, which represented 75% of its remaining reserves, to secure a profit of $64 million. At that time, Bitcoin was trading approximately 70% lower than its record high of $69,000 in November 2021.
Tesla initially purchased $1.5 billion worth of Bitcoin in February 2021 at an average price of $36,000. The company then sold BTC worth $272 million to boost its Q1 2021 accounting by $101 million.
As of Q4 2022, Tesla still holds 10,725 BTC worth approximately $330 million, which is almost 15% below the procurement value from February 2021.
Overall, Tesla has made approximately $165 million in profit from two separate Bitcoin sales. As of April 14, the company holds an unrealized loss of approximately $56.6 million on its remaining BTC holdings, while its net profit to date sits at around $108 million.
Will Tesla dump its remaining BTC holdings?
Interestingly, Tesla’s previous Bitcoin sales were made during weaker free cash flows. For example, the $272 million Bitcoin sale in Q1 2021 accounted for nearly 93% of Tesla’s free cash flows that same quarter.
Tesla’s Bitcoin sales in Q2 2022 also occurred during a 73% decrease in free cash flows compared to the previous quarter. Both sales suggest that Elon Musk relied on Bitcoin as a hedge as Tesla faced cash crunches.
At the time of the sale, Musk explained that it was made to “demonstrate the liquidity of Bitcoin as an alternative to holding cash on a balance sheet.”
However, analysts predict that Tesla’s free cash flow in Q1 2023 could reach nearly $2 billion, a 40% increase from the previous quarter, which could reduce the chances of significant Bitcoin sales from Tesla in the near future.
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
