Tesla Sells Bitcoin Holdings: Will This See the Beginning of a Trend for Other Businesses Who Hold Crypto?

Despite being one of the wealthiest people in the world, Elon Musk is not exactly the most trustworthy. Just a couple of months ago, the billionaire philanthropist made waves by announcing a bid to buy the social media platform Twitter, which he ended up winning. Just one month later, he backed out. At the tail end of last year, he also told the world that Tesla had no plans to sell off its Bitcoin assets (which amounted to around $1.5 billion in fiat currency), but by the end of July, Tesla sold 75% worth of its holdings.  

It appears that an entire bag of salt must be added to the cocktail of Musk’s words and promises. Although he has the power to lift platforms like Bitcoin and Dogecoin when they’re up (Tesla’s investment came at a time when Bitcoin was trading for $45,000), he similarly has the ability to knock the platforms when they are down. After the announcement, the price of Bitcoin dropped significantly, which is indicative of the current bear market as a whole. 

What Is The State Of Cryptocurrency Right Now?

Tesla’s decision to sell off its Bitcoin assets for a price of $995 million has, in many ways, been the most public indicator of this bear market so far. But for several months now, the cryptocurrency market has been on a downward trajectory, with the price of Ethereum and Bitcoin demonstrating high volatility caused by inner turmoil, as well as global inflation. 

This is not exactly a new concept for crypto. Just a few years ago, Bitcoin fought its way through a crypto winter, only for its price to hit an all-time high of $69,000 in December 2021. For many investors in the market, volatility is just another aspect of its makeup: when it’s going well, the market is full of opportunities - when it’s going badly, the market can start to look a little bleak.

Why Is Tesla Selling?

In many ways, it is a fight between short-term needs and long-term visions, which is why Tesla’s decision to sell its assets comes as a little bit of a surprise. Despite Musk’s track record when it comes to promises, he has always been regarded as a visionary, with the company’s public endorsement of crypto providing a weighted belief in the currency’s future and prospective value. 

According to Musk, Tesla’s decision to sell 75% of Bitcoin assets should not be seen as an indictment on Bitcoin itself. Instead, it is the overall liquidity of the company, the impact of China’s pandemic shutdowns, as well as a need to add more cash to the balance sheet that has ultimately led to their conclusion. 

With his track record, however, there is every chance this is a smoke screen. For any company’s treasury management, downward volatility is always going to be a cause for concern, especially if the future of a particular asset cannot be accurately pinpointed. In this way, there is every chance Tesla has simply joined a collective of companies and investors who have decided that winter is too cold to stick around in. 

Will Other Businesses Follow Suit?

It is also important to note that Tesla is one of the most influential and revolutionary companies in the world.  When Elon Musk made his public endorsement of Bitcoin in July 2021, the price shot up by over 12%. This demonstrates the kind of impact one company can have on the wider market, so it is not outside the question that other businesses may follow suit, and the price will similarly be affected.

Like cryptocurrency itself, however, it is hard to predict any kind of trend when it comes to how other companies will manage their stock. Once again, it comes down to the two types of crypto owners. Those with short-term needs and those with long-term ambitions. 

MicroStrategy, for instance, is another business that has invested in over 130,000 BTC, which is equivalent to around $2.3 billion. 

CEO Michael Saylor has been increasingly vocal about his belief in crypto and its ability to reach record-breaking highs in the future. In many ways, his unique vocalisation about his own investments makes MicroStrategy just as influential as Tesla. While the bear market can be daunting enough to sway some businesses' former investments, there are many other businesses who will be using Saylor’s continuing endeavours as an example when they sit tight on their assets. 

Of course, the immediate future of Bitcoin and other cryptocurrencies is not exactly optimistic. But so long as there are businesses like Tesla and Microstrategy performing a balancing act on the scales, it is unlikely there will be one secular trend which determines how crypto will come out on the other side.