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Tesla Ruins Bitcoin Rally? Musk’s Company Sold 75% Of Its BTC

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Bitcoin lost some of its gains after Tesla’s earnings report was released. Elon Musk’s company said it sold 75% of its BTC holdings at a 9% loss in the second quarter of 2022.

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According to reports, the company converted its bitcoin holdings into fiat currency. As a consequence, Bitcoin has been rejected near the $24,000 price point and is now trading at $23,100 with a 2% loss in the last hour.

BTC price with important gains on the 4-hour chart. Source: BTCUSD Trading Review
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The cryptocurrency is still recording a 20% gain over the past week and market sentiment remains optimistic about potential gains going forward. Jeff Dorman, CIO at investment firm Arca commented the following about recent developments and their potential impact on Bitcoin:

If you ever wondered if trading bots control digital asset trading or not…be aware that the entire digital asset market just crashed on the news that one company (Tesla) sold one asset (BTC) 1-3 months ago. Expect a full recovery of this movement quickly.

Tesla shares posted a 4% gain immediately after the earnings report and are approaching their highest level since June. Ludwig Wittgenstein argues that the car manufacturer’s decision to liquidate a significant portion of its BTC holding could have long-term implications for the cryptocurrency market.

Elon Musk’s company acquired bitcoin in 2021. At the time, the price of BTC was losing momentum as it traded near its current levels, but when Tesla announced its decision, the cryptocurrency was able to enter uncharted territory.

The company acquired BTC as a corporate strategy to hedge against inflation and as a tool to potentially increase cash flow. Thus, why is it important to understand the reasons behind this BTC sale.

According to Wittgenstein, there are three possible scenarios: the company needs to raise cash, there are climate concerns about the alleged energy consumption of BTC, or a complete loss of faith in the cryptocurrency. The first scenario is the most bullish and the last is the most bearish.

Why did Tesla sell its bitcoin?

NorthmanTrader founder Sven Henrich believes Tesla was following a corporate strategy when the price of bitcoin fell below $20,000. The company forced itself to liquidate some of its assets in order to maintain its cash flow. Henry said:

In terms of trading: $TSLA called in margin and liquidated most of its digital asset portfolio to make free cash flow positive and improve its balance sheet.

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So far, it seems that the first Wittgenstein scenario is in play. If the cryptocurrency market is able to stay on its current course despite the Tesla news, the price of BTC could recover an important area above $27,000.

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