Elon Musk sold 75% of the Bitcoin (BTC) held by Tesla in the last quarter. Moreover, he wants to get out of the deal he made to buy Twitter. Falling crypto prices and recession fears explain the sell-off, experts say.
Why did Elon Musk choose to sell Bitcoin?
Elon Musk, who is currently trying to stop buying Twitter, announced on Wednesday that Tesla sold 75% of its Bitcoins in the last quarter. The tech billionaire offered some excuses for the sales. However, falling crypto prices and a bleak economic backdrop are likely to play a role in both decisions.
Musk says Twitter is manipulating the number of bots on its platform. He said in the past months that Twitter’s bot data is misleading. It also accuses Twitter of allowing key executives to leave since it made a $44 billion bid to buy social media. He sued Musk on Twitter to enforce the binding merger agreement he signed. Now the two sides will face each other in court in months.
That’s why Tesla sold $936 million worth of Bitcoin
Elon Musk said that Tesla sold $936 million worth of Bitcoin to supplement its cash reserves as the COVID-19 quarantines paused the Shanghai factory. The Tesla CEO states that the electric vehicle company has not sold any of its Dogecoins. On the other hand, he emphasizes that Tesla’s focus is to shift the world to sustainable energy sources.
Maybe Musk has really cooled off from the Twitter deal. This is because Twitter is full of bots. On the other hand, Tesla may have feared a cash crunch. The company’s processed cash flow increased 11% last quarter to $2.4 billion. It also finished the same period with over $18 billion. However, Tesla is in a hurry to replace its Bitcoin in its reserves with dollars.
Twitter shares have also lost 22% since Musk first announced his stake in the company in early April. It’s easy to say that the 32% drop in Tesla stock over the same period scared Musk. After all, his bid for Twitter represents a massive 30% premium over current market cap.
Buying Twitter will consume a large portion of Musk’s wealth before Tesla stocks plummet. Meanwhile, Bitcoin has fallen by roughly a third since Tesla first bought it in early 2021. It has lost about 57% in the last quarter alone. Musk says Tesla is open to increasing Bitcoin holdings in the future. At the same time, he says its divestment should not be perceived as a decision about the future of Bitcoin. However, the timing of the sales is hard to ignore.
Tesla, Bitcoin and Twitter melted this year
The declines in Tesla, Twitter and Bitcoin this year are undoubtedly tied to the US economic outlook. Inflation has risen to its highest levels in 40 years in recent months. Thus, it forced the Federal Reserve to rapidly increase interest rates and shrink its balance sheet. Higher food, fuel and housing costs combined are setting the stage for potential recession on companies. Indeed, Musk declared last month that a recession is “inevitable” and likely in the near term. It also announced a reduction in Tesla’s workforce of about 10% in about three months.
Musk is shelving his takeover on Twitter, for exactly the reasons he’s outlined. It looks like Tesla’s Bitcoin wallet is melting down. However, it is noteworthy that he wanted to buy Twitter and invest in Bitcoin when prices were high. Now Tesla, Twitter and Bitcoin prices have dropped and a recession is approaching. Musk is trying to take precautions as a bleaker reality emerges.
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