What's the mystery behind Tesla's Bitcoin sell-off

What’s the mystery behind Tesla’s Bitcoin sell-off?

On July 21, Bitcoin (BTC) price recovered to $24,000, and some analysts believe the bear market is over. But on the same day, the bitcoin dynamic appeared to be spinning out of control after news broke that automaker Tesla had sold 75% of its bitcoin holdings. After the company released the relevant earnings data, Bitcoin began to fall, and the trading price has been hovering in the low $20,000 for the next six days.

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Why sell bitcoin?

Tesla sold three-quarters of its bitcoin position at $963 million, according to Tesla’s second-quarter earnings report. CEO Musk was asked about it on a conference call. He clarified that the sell-off “should not be viewed as a verdict on Bitcoin,” but rather that Tesla wants to increase its cash reserves amid concerns over China’s continued lockdown. He added that Tesla would be open to adding bitcoin reserves in the future, but stressed that the cryptocurrency is not a priority for Tesla, calling it a “side business within a side business.”

Selling digital or other assets for cash is a common practice for companies to solve liquidity problems, so Tesla’s move has nothing to do with Bitcoin’s fundamentals (whether as a technology asset or an investment asset). And, it could even have a long-term positive effect on the cryptocurrency market, as Musk has already influenced prices in unreasonable ways based on his previous actions involving cryptocurrencies.

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Market Reaction

Many countries are experiencing their hottest summers on record, and the cryptocurrency “winter” has yet to pick up. Fortunately, the “Tesla effect” seems to have weakened.

Tesla made headlines with its first purchase of $1.5 billion worth of bitcoin in 2021, and the price of bitcoin soared 60% in the following month. But even if the recent bitcoin sale has an impact on the market, its intensity is rather modest and short-term. Bitcoin is still trading in a fairly tight range, with most altcoins moving with it.

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Has Musk lost his influence in the cryptocurrency world?

The lackluster market reaction to Tesla’s Bitcoin sell-off may suggest that more cryptocurrency traders and investors are no longer willing to be swayed by the tech mogul’s comments. Musk’s public reputation has been tarnished by a series of scandals in recent months (behavior of employees, failed acquisition of Twitter, etc.), but crypto fans won’t forget that Musk is manipulating his celebrity status Dogecoin (DOGE) allegations. For many advocates for the decentralised and empowering nature of crypto, such a billionaire with so much influence is not a good thing. Musk’s reputation as a “tech innovator” is built on his company’s ambitious goals, and he has no particular background or expertise in cryptocurrencies.

Of course, Musk reiterated Tesla’s commitment to green energy and automation, and we hope that the market will also focus on the fundamental value and application of cryptocurrency projects, rather than capitalizing on celebrity hype.

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