Benzinga - Tesla Inc., led by CEO Elon Musk, has continuously looked for new ways to innovate and use the latest technologies. This has manifested itself in many ways, ranging from autonomous driving to commercial solar panels. However, one less-discussed instance of Tesla using novel technology is with Bitcoin investments.
Musk is a known advocate for crypto, constantly posting on social media about cryptocurrency and accepting some forms of crypto as payment for Tesla merchandise. However, Musk put his money where his mouth was in 2021, making an investment in Bitcoin (BTC) that was unprecedented at the time.
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In February 2021, Tesla spent $1.5 billion to purchase roughly 43,000 BTC at an average cost of around $38,000. Tesla used the extra cash to make the purchase and earn some return, citing low interest rates and high inflation.
After the investment was announced, Bitcoin's price quickly spiked to nearly $50,000, and Tesla's Bitcoin holdings were worth as much as $2.65 billion in mid-March 2021. By the end of March, BTC went as high as $60,000, prompting Tesla to sell some of its positions. Tesla sold 10% of the position, or 4,320 BTC, which allowed it to earn approximately $250 million in proceeds.
The company did not make any other moves with its Bitcoin holdings until June 2022. Between March 2021 and June 2022, the company held nearly 39,000 BTC, and the value of the position went as low as $875 million in June 2022.
At this time, Tesla sold a majority of its BTC. It sold 29,160 BTC for an average price of around $20,000. According to Musk, the sale served multiple purposes, such as proving that BTC can handle large transactions and giving Tesla extra cash in the event of a recession.
The sale came at one of the worst times possible. Bitcoin hit its lowest level in 18 months shortly after the sale but has since appreciated over 350% in the 16 months following.
In 2024, the price of Bitcoin has gone as high as $73,750. If Tesla had HODLed its original investment of 43,200 BTC, it would have been worth nearly $3.2 billion at the highs set in 2024. This is a gain of more than 100% or $1.55 billion. Instead, Tesla holds less than 10,000 BTC worth around $700 million.
By holding the tokens, Tesla would not have had to pay a capital gains tax on the first sale of Bitcoin in March 2021.
While Tesla may have made some poor trades with Bitcoin, the price has appreciated so much since then that the cumulative profit and loss on its BTC trades is nearing 0. If BTC keeps going up, Tesla could see green yet again.
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