Tesla cashed out most of its bad bitcoin bet

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Tesla made waves and skyrocketed the price of bitcoin when it announced a $1.5 billion investment in cryptocurrency in February 2021. A company of Tesla’s stature placing such a big bet in the booming and volatile crypto market was unprecedented. Tesla retained much of its stake as bitcoin hit new highs in late 2021.

But bitcoin’s value has since plummeted amid a broader economic downturn. The currency has lost more than 50% of its value this year and plunged further on Wednesday afternoon after Tesla’s announcement.

In a conference call on Wednesday, CEO Elon Musk said the sales were driven by uncertainty surrounding COVID-19 restrictions in China. A coronavirus lockdown in Shanghai severely limited Tesla’s ability to produce vehicles at its factory there, reducing its overall sales for the quarter.

“We weren’t sure when the Covid lockdowns in China would ease, so it was important for us to maximize our cash position,” he said. “We are certainly open to increasing our bitcoin holdings in the future, so this shouldn’t be taken as a verdict on bitcoin.”

Musk added that Tesla still holds Dogecoin, a cryptocurrency that started out as a joke and which Tesla accepts as payment on its online store.

The automaker said it still held $218 million in “digital assets” as of June 30, up from $1.26 billion at the end of the previous quarter. He justified his initial purchase by saying he was looking for liquid assets that had more potential than cash.

Tesla reported second-quarter results on Wednesday, beating analysts’ estimates but posting its first-ever quarter-over-quarter profit decline.

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