Elon Musk reveals Tesla sold 75 per cent of its bitcoin after crypto market crash

The world’s richest person has revealed his car company Tesla sold around 75 per cent of its cryptocurrency after the market crashed.

Little more than a year after Elon Musk said Tesla “will not be selling any bitcoin,” the car company has sold three quarters of its investments in the volatile crypto currency.

Tesla’s move to shed almost all its bitcoin is another blow to crypto currencies that soared in value in 2021 — and then plunged this year.

In its quarterly update, filed on Wednesday, Tesla confirmed it had offloaded the cryptocurrency.

“As of the end of Q2, we have converted approximately 75 per cent of our bitcoin purchases into fiat currency.

“Conversions in Q2 added $US936 million ($A1.36 billion) of cash to our balance sheet.”

Bitcoin took a battering when the Tesla news was released, with the price diving sharply.

It’s a huge backflip after Musk tweeted, “Tesla has diamond hands,” using emojis in May last year.

Tesla has 💎 🙌

— Elon Musk (@elonmusk) May 19, 2021

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Tesla sold off 75 per cent of its bitcoin. Picture: Ozan Kose/AFP

In February 2021, Tesla announced it had bought $US1.5bn ($A2.18bn) worth of Bitcoin and would look to investing more in it and other crypto currencies.

The investment was one factor that helped to keep the value of bitcoin soaring. In November, one bitcoin was worth around $US65,000 ($A94,260); It now trades for $US23,000 ($A33,350).

Tesla sold off 10 per cent of its bitcoin investment in April 2021 banking a profit of $US101m ($A146m) in the process.

In May 2021, Mr Musk announced on Twitter that Tesla would no longer allow vehicle purchases with bitcoin. The reason given was that the huge energy involved in bitcoin mining was not unsustainable.

That announcement led to a 5 per cent drop in the value of bitcoin.

However, at the time, Mr Musk added that “Tesla will not be selling any Bitcoin”.

That commitment was broken with news of the sale on Wednesday.

Tesla’s $US1.5bn bitcoin investment grew in value to $US2.48bn ($3.60bn) in the first quarter of 2021 but then fell as the currency’s value sank.

Tesla & Bitcoin pic.twitter.com/YSswJmVZhP

— Elon Musk (@elonmusk) May 12, 2021

Finance website CNBC quoted Barclays Bank analyst Brian Johnson who estimated Tesla would see a $US460m ($A667m) impairment due to the ditching of 75 per cent of its bitcoin investment.

In a call to investors on Wednesday, Mr Musk defended the sell-off.

“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 maximise our cash position.

“This should be not taken as some verdict on bitcoin.”

Mr Musk said Tesla could increase its crypto investments down the track.

But, he added, bitcoin was a “side show to a sideshow” to Tesla’s main business.

Tesla CEO Elon Musk said the company could buy more bitcoin in the future. Picture: Patrick Pleul/Getty Images

Mr Musk said that Tesla still held the cryptocurrency that started out as joke, dogecoin, which it also accepts as payment in its online store.

Tesla still holds $US218 million ($A316 million) in digital assets like cryptocurrency, down from $1.26 billion ($A1.82 billion) at the end of the previous quarter.

Profits for the car maker dropped by 32 per cent in the second quarter of the year due to supply chain issues and the pandemic lockdowns in China.

Tesla has sold three quarters of its investments in the volatile crypto currency. Picture: Jim Watson/AFP

Back in May, Mr Musk described new factories in Austin in the US and Berlin in Germany as “money furnaces” that were causing the company to lose billions of dollars due to supply chain breakdowns limiting the number of cars that could be produced.

“Right now, there’s a giant roaring sound which is the sound of money on fire,” he said at the time.

But the German plant “reached an important milestone of over 1000 cars produced in a single week while achieving positive gross margin during the quarter,” the company said

Tesla sold 254,000 vehicles between April and June. Picture: Justin Sullivan/Getty Images/AFP

However, it still reported a staggering $US2.2 billion ($A3.9 billion) net profit and predicted that annual vehicle sales would grow by 50 per cent over the next few years. Sales fell to 254,000 vehicles between April and June.

The company had made a record $US3.3 billion ($A4.8 billion) for the first quarter of the year.

It said it had its highest production month in history in June and expected record-breaking sales for the second half of the year.

Last month, Mr Musk backflipped on a plan to cut around 10 per cent of the electric car maker’s workforce after telling Tesla employees in an email that he had a “super bad feeling”.