Elon Musk, Tesla lose $65.4m after betting on bitcoin, sell off over 29,000 BTC

Elon Musk has sold Tesla’s bitcoin holdings amid slump in the cryptocurrency market. The sell off reduces the automaker’s exposure to volatility risk associated with bitcoin, but it comes at a loss.

The automaker cut down its holdings by 75% in H1, according to its Q2 2022 financial statements, earning $936 million as “proceeds from the sales of digital assets”

Tesla now holds $226.5 million worth of bitcoin, based on current price of $23,307 as at the time of filing this report, reflecting declining trust, the major investor has in the most valuable cryptocurrency, which has been struggling to loosen the grip of the bears on it, considering it’s down -49.6% year-to-date, losing $23,004.17 in seven months.

Is Tesla and Elon Musk ending greater fool journey amid bitcoin loss?

On February 8, 2021, Tesla reported that it had acquired 43,200 bitcoins at the cost of $1.5 billion, and started accepting the cryptoasset as a payment option. This boosted the confidence of investors, and drove BTC value beyond its intrinsic value.

The announcement sent BTC on a bullish run above $40,000 in the rest of the year, having traded at $38,886.83 the day of the disclosure, and below $40,000 between January 1 to February 8, 2021.

Read also: Elon Musk, crypto investors react to Warren Buffet’s criticism of bitcoin

Ripples Nigeria gathered that Tesla sold about 4,320 bitcoins in Q1 2021 for $272 million, amid bitcoin’s value surge, having risen from $28,994.01 on January 1 to $58,930.28 on March 31 last year.

Tesla was left with 38,880 bitcoins into H2 2021. At some point in November last year, the remaining investment was worth around $2.68 billion when the value of bitcoin surged to its all time high of above $68,000.

However, as at the end of last year, Tesla’s investment value dropped to $1.78 billion, as bitcoin trades around $46,000, according to a file submitted by the company to the United States Securities and Exchange Commission (SEC) in February this year.

Despite the decline in bitcoin dragging Tesla’s investment down last year, the automaker still held on to the BTC into Q2 2022, at the time, bitcoin had fallen to $20,108.31 on June 30 from $45,554.16 of April 1.

While Tesla didn’t state the price it sold the 75% BTC holdings, which represents 29,160 bitcoins, Ripples Nigeria findings showed it lost $65.4 million so far in its principal investment after holding bitcoin until the cryptoasset reversed in value of its purchased period.

The amount Tesla sold its bitcoins and the current value of the remaining 9,720 BTC (based on bitcoin price at the time of filing this report), is $1.43 billion, against the $1.5 billion invested. This means the automaker is selling its bitcoins without any gain, and at a loss, if the cryptoasset continues to trade under $30,000 pending the time the firm sells what’s left.

The sell off seem to be pointing out that Tesla and Musk are winding down their greater fool journey, considering they bought bitcoin at a high cost as a store of value, with intention to make returns on the invested cash – which means they expected there will be investors willing to buy BTC at a higher price than they acquired it.

A greater fool theory is an investor purchasing an asset or stock above its intrinsic value, in hope that investors exist out there interested in buying the asset at a higher price and sell in premium before it crashes back to its real value.

When the asset crashes, it means there are no longer greater fool left to sell to, and with bitcoin struggling to go bullish, there are indications that the fools are drying up in the cryptocurrency pipeline, making selling at a premium impossible.

While there were investors willing to buy at a premium price last year November, when BTC hit its all time high, Tesla held on to its bitcoins, then got stuck in the sell off in H1 2022, with limited exit opportunities.

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