Despite the current market conditions, publicly traded companies must still report their earnings. With Tesla releasing their earnings yesterday, and many other tech giants like: Apple, Meta, and Microsoft releasing their earnings next week, we could either witness a small bear market rally or even further downfall. Even though we have started off on a good note with Tesla beating their earnings estimates by around $0.47 per share, something eye-opening was stated in the earnings call.
In the earnings call, it was made evident that Tesla sold 75% of their Bitcoin supply that they had accumulated in January of 2021. Considering that the price of Bitcoin in January 2021 was around $32,000, this means that Tesla sold 75% of their Bitcoin for a loss. But Why?
CEO of Tesla, Elon Musk, made it very clear that the company selling Bitcoin had nothing to do with his views on the currency but everything to do with current global conditions. With Tesla’s largest factory, the Shanghai Gigafactory, heavily affected by random China lockdowns, the company’s largest exporter of vehicles was not constantly able to deliver vehicles. In order to compensate for the lack of cash flow that these shutdowns caused, Elon had no choice but to reach into the company’s Bitcoin investment. However, Elons sale of Bitcoin raises another question, Why didn’t crypto investors care?
Unlike January 2021, where Elons announcement of Tesla purchasing Bitcoin was responsible for a rally that led the currency to 2x in the span of 2 months; yesterday when Musk reported this sale, Bitcoin was trading relatively flat. There are many speculated reasons for BTC trading flat regardless of Elons sale, however I will share the theory I lean towards.
In January 2021, Bitcoin had just seen its first major bull rally which led the currency to go from $14,000 in November of 2020 to $40,000 in January 2021. This meant that millions of new investors had just entered the market. Then when it was announced that Tesla had purchased $1.5 billion worth of Bitcoin in 2021, millions of more new investors once again flooded the crypto market, copying their favorite CEO. It would not be a wild guess to say that many blindly followed Elon on this move with little to no knowledge about crypto. Whether or not these new investors were knowledgeable about crypto, it did not matter since they further pushed the bull rally, causing Bitcoin to reach around $62,000 in March of 2021. Once Bitcoin started to fall however later in the year, was when all these blind followers of Elon Musk quickly left the market. During this bear market of crypto that arguably started in November 2021, all that was left were strong believers in crypto despite current events.
The true believers in crypto make up a majority of the currencies holders today, which is exactly why Musk’s announcement did not have an effect on the currency. The followers who had blindly followed their favorite CEO have long left the market, and now mostly true believers remain.
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