Bitcoin has lost some of its gains as news about Tesla’s earnings report is published. Elon Musk’s company disclosed that 75% of its BTC holdings were sold at a loss of 9% over Q2, 2022.
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The following is an extract from the reportsThe company converted its Bitcoin holdings to fiat currency. Bitcoin fell short of the $24,000 price point, and it now trades at $23,100. This is a 2% decrease over the hour.
Still, cryptocurrency has seen a 20% increase in value over the last week. Market sentiment remains positive about future profits. Jeff Dorman is the CIO of investment firm Arca commented The following information is about recent developments that could have an impact on Bitcoin.
If you’ve ever wondered whether or not trading bots control digital asset trading…keep in mind the entire digital asset market just fell on news that one company (Tesla) sold one asset (BTC) 1-3 months ago. You can expect a rapid retrace of the entire move.
Tesla stock saw a 4% profit right after it published its earnings reports. It is now at its highest level since June. Ludwig Wittgenstein claims the car manufacturer’s decision to liquidate a large portion of its BTC holding could have long-lasting consequences for the crypto market.
Earnings increase by Tesla +4%
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— TradingView (@tradingview) July 20, 2022
In 2021, the Elon Musk-led firm bought Bitcoin. At that time, BTC’s price was losing steam as it traded around its current levels, but when Tesla announced its decision, the cryptocurrency was able to rally into uncharted territory.
BTC was bought by the company to hedge against inflation, and potentially increase its cash flow. It is therefore important to understand why BTC was sold.
Wittgenstein says there are three possible scenarios. The company needs to raise cash, climate concerns over BTC’s alleged energy consumption or total faith loss in cryptocurrency. The first scenario, which is more bullish than the second, is the most bearish.
Why Did Tesla Sell Its Bitcoin?
NorthmanTrader founder Sven Henrich believes that Tesla adopted a corporate strategy after the price of Bitcoin fell below $20,000. Henrich said that the company was forced to liquidate a part of its assets in order to maintain its cash flow. Henrich said:
In trading terms: $TSLA got itself margin called and liquidated a large chunk of its digital asset portfolio to make itself free cash flow positive & improve its balance sheet.
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So far, Wittgenstein’s first scenario seems to be in play. If the crypto market can stay in its current course, despite Tesla’s news, BTC’s price could reclaim the important area above $27,000.