Last Updated on July 21, 2022 by Bitfinsider

The transaction “should not be taken as a verdict on Bitcoin,” according to Telsa CEO Elon Musk, who added that the company is “certainly open to increasing our Bitcoin holdings in the future.” The decision was motivated by worries about liquidity in light of the ongoing Covid lockdowns in China.

Experts in the cryptocurrency sector are generally unconcerned with Tesla‘s intention to sell 75% of its Bitcoin (BTC) holdings, noting that this is a pretty common tactic used by businesses to increase cash flow amid downturns in the economy.

Tesla disclosed on Wednesday that it had sold $75% of its Bitcoin holdings in the second quarter, adding $936 million in fiat to its bank sheet.

“The reason we sold a bunch of our Bitcoin holdings was that we were uncertain as to when the Covid lockdowns in China would alleviate. So it was important for us to maximize our cash position.”

Musk responded that Bitcoin was a “sideshow to the sideshow” of Tesla’s primary objective, which is “to accelerate the advent of stable energy,” in response to a question from investors on the results call about whether he considered Bitcoin as a long-term asset. He also added that: “Cryptocurrency is not something we think of a lot.”

Tesla likely sold up its Bitcoin because it was “seen as a distraction from their core business,” according to Markus Thielen, chief investment officer at Singapore-based digital asset manager IDEG.

The move by the electric vehicle manufacturer to “shore up capital in cash currencies” has not been unique, according to Finder’s share trading expert Kylie Purcell.

“With the world heading into an economic slowdown and possibly a recession, it’s not unusual for investors and companies to move capital away from more volatile assets into fiat currency,” she added.

While the revelation caused a drop in the price of Bitcoin, she continued, there are already indications of a rebound.

Following Tesla’s announcement on Wednesday, the price of Bitcoin dropped by about 2.6 percent before rising again to $23,299 at the time of writing, tracking near to its one-month high, indicating that the crypto community may not have been very alarmed by the news.

The transaction received a different response than when Telsa announced in February of last year that it had acquired $1.5 billion in Bitcoin to add to its balance sheet and planned to accept Bitcoin as payment for some items (though this was later scrapped). Bitcoin’s price instantly increased by about $3,000 in response to the news, reaching a new record high of more than $43,000.

According to Tommy Honan, head of strategic partnerships at Swyftx, Tesla’s purchase of Bitcoin last year was “as important a moment as you can imagine for digital assets.”

Honan added: “Musk said the sale wasn’t a verdict on Bitcoin, just a cash play, and it looks like the market has taken him at his word. Bitcoin’s price has stabilized over the last 24 hours and we’d be surprised if other big investors followed suit, especially given the current price of Bitcoin.”

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