Tuesday, January 31, 2023

Bitcoin rises after plunging following news that Tesla liquidated 75% of its shares

Bitcoin recovered from a sharp sell-off late Wednesday, triggered by news that electric carmaker Tesla Inc (TSLA.O) had liquidated almost 75% of its virtual asset holdings.

Tesla CEO Elon Musk stated that the transaction was motivated by concerns about his company’s “total liquidity.”

After falling as much as 0.5 percent to $23,268.92 on the news, the world’s largest cryptocurrency was recently up 1.04 percent at $23,494.57.

Tesla sold $936 million in bitcoin in the second quarter, more than a year after purchasing $1.5 billion at the zenith of its vast growth and popularity.

Musk has been a vocal proponent of cryptocurrencies. His predictions about the future of crypto and his disclosures about his ownership of digital assets frequently enhance the price of dogecoin and bitcoin.

Musk started on Tesla’s earnings call that the key reason for the sale was uncertainty over COVID-19 lockdowns in China, which have posed production issues for the company.

“It was important for us to maximize our cash position,” Musk said. “We are certainly open to increasing our bitcoin holdings in future, so this should not be taken as some verdict on bitcoin. It’s just that we were concerned about overall liquidity for the company.”

Musk also stated that Tesla did not sell any of its dogecoin, a meme-based cryptocurrency he has promoted.

Tesla accepted bitcoin for less than two months before discontinuing it in May 2021. Musk has stated that the company may resume taking bitcoin after researching the amount of renewable energy required to mine the currency.

Bitcoin has been recovering along with the stock market this week as investors become more confident in the ability of the United States Federal Reserve to rein in decades of rising inflation.