The cryptocurrency market is experiencing a new bullish cycle, with investors crowding the markets to get a piece of the pie. It has been a great year for crypto, with prices soaring and retail investors using trading platforms such as Bitlevex to make profits.
However, this cycle has been quite different in one regard from all the previous ones – the support from institutional investors. Companies like Microstrategy and Tesla have invested billions of dollars in Bitcoin this year, giving a sense of legitimacy to the entire crypto sphere.
But like during every bull run, there’s always a fair share of fear, uncertainty, and doubt (FUD) that spreads over the internet. Lately, we’ve been hearing a lot of regulation rumors, as well as tax increases that might impact capital gains from cryptocurrencies.
The latest piece of FUD news involved Elon Musk and Tesla, who allegedly “dumped” the Bitcoin they acquired earlier this year. But how much of this is true?
In this article, you will learn everything about Tesla’s investment in Bitcoin, and the latest news about the alleged selloff. Let’s begin.
When and how much did Tesla invest in Bitcoin?
Early February of this year, Tesla announced that it bought as much as $1.5 billion worth of Bitcoin. This move was a sign that big investors and companies were gaining trust in the original cryptocurrencies s a store of value asset.
According to Tesla CFO Zachary Kirkhorn the reason behind this investment was that the company was looking for a viable asset to store their cash while making it readily available. Bitcoin, of course, fits this narrative perfectly, being an easily transferable and appreciating asset.
It was a great way to set aside cash money into an asset that won’t be used in daily operations and that would allow some good returns in the long run.
The effects of Teslas Bitcoin investment
As we mentioned earlier, this move was preceded by Michael Saylor’s Microstrategy investing in as much as 90.000 Bitcoin.
Both announcements were a trigger for some good sentiment in the markets and subsequently, Bitcoin’s price rose to new highs shortly thereafter. In February 2021, the price of Bitcoin almost doubled, starting at around $32.000 and reaching a new all-time high of $58.000 by the end of the month.
How much Bitcoin did Tesla sell and why?
However, in late April, Tesla’s Q1 earnings report was published showing that the company had already sold a portion of its Bitcoin holdings.
To be exact, 10% of the initial Bitcoin buy-in was sold earlier this year (around $200 billion), which generated $100 million in profits for the company.
A portion of the cryptocurrency community reacted quite negatively to this announcement. People criticized Tesla because of the initial claim stating that their Bitcoin holdings were a long-term investment. Some even accused Elon Musk of orchestrating a pump and dump scheme on a large scale.
However, the truth is somewhere in between:
- Tesla sold only a portion of its holdings to prove the token’s liquidity to its investors. Elon Musk’s decision to invest in the crypto asset was criticized internally and proof of liquidity test was deemed necessary to put investor’s minds at ease.
- The company still plans to hold Bitcoin in the long term. Tesla even began accepting Bitcoin as a method of payment for their electrical vehicles in the US. This should serve as a dollar-cost averaging investment strategy in Bitcoin.
The crypto market is volatile and FUD is a defining factor that can impact prices negatively. It’s always better to take bombastic titles with a grain of salt and do a bit of research before succumbing to false news.