Bitcoin gamble pays off for Tesla after making $130 million from the cryptocurrency

Electric carmaker Tesla’s CEO Elon Musk has been accused of publicly embracing the cryptocurrency and pushing prices up.

Tesla’s foray into the cryptocurrency market made it quite a bit of coin, the company announced.

The electric carmaker’s first-quarter earnings released on Monday revealed that it sold some of the $US1.5 billion ($A1.9 billion) worth of bitcoin that it purchased in February, giving the company a $101 million ($A130 million) bump in profit. That’s no small lump of cash, considering it makes up nearly one-quarter of the company’s $US438 million ($A564 million) in profit, Tesla’s biggest ever.

On a conference call with analysts, chief financial officer Zach Kirkhorn elaborated on the company’s interest in the cryptocurrency and said Tesla intends to hold the digital token over the long-term, despite its recent sale. The company still has about $1.3 million ($A1.9 million) in bitcoin.

“Elon and I were looking for a place to store cash that wasn’t being immediately used, trying to get some level of return on this, but also preserve liquidity,” said Mr Kirkhorn, who was officially appointed Tesla’s “master of coin” last month.

“Bitcoin seemed at the time, and so far has proven to be, a good decision – a good place to place some of our cash that’s not immediately being used,” he added. “It is our intent to hold long-term.”

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Tesla sold some of its bitcoin with the proceeds making up nearly a quarter of the company’s first quarter profits. Picture: Ina Fassbender/AFP

When Tesla announced its initial purchase of bitcoin, it also said it would accept the digital coin as payment for its cars. That made Tesla the first major automaker and one of the first major companies in any industry to embrace bitcoin. The move helped spark a strong run by bitcoin to its recent peak.

When Tesla disclosed its bitcoin holdings in February, the crypto was exchanging hands at about $US38,540 ($A49,603) per coin, according to data from Coindesk.

By April 15, the digital coin closed at a price of $US63,460 ($A81,677) per coin and is now trading at about $US55,170 ($A71,007).

Some have criticised Tesla and CEO Elon Musk for publicly embracing bitcoin, helping the price run-up and then selling the coin. Before Tesla’s disclosure of its bitcoin purchase, Musk was credited with increasing the prices of several cryptocurrencies, including dogecoin, by posting positive messages about them on Twitter.

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Some have criticised Tesla and CEO Elon Musk for publicly embracing bitcoin, helping the price run-up. Picture: Patrick T. Fallon/AFP

Dave Portnoy, Barstool Sports founder who’s recently made a name for himself playing the stock market, addressed Musk on Twitter over Tesla’s bitcoin dump.

“So am I understanding this correctly? @elonmusk buys #bitcoin. Then he pumps it. It goes up. Then he dumps it and make a fortune,” Mr Portnoy wrote, urging his followers not to be the last one holding the bag.

Musk responded, “No, you do not. I have not sold any of my bitcoin. Tesla sold 10 per cent of its holdings essentially to prove liquidity of bitcoin as an alternative to holding cash on balance sheet.”

Despite Musk’s explanation, Tesla’s move raises questions that could catch regulators’ attention. The SEC has flagged Musk in the past for his market-moving tweets. The SEC charged Musk with fraud in 2018 for his tweets about taking the company private at $420 per share.

Musk ultimately settled with the SEC, and was forced to give up his role as chairman of the company’s board. He also paid a $US20 million ($A25 million) fine as well as another $US20 million ($A25 million) fine for the company itself.

This story originally appeared on the New York Post and is reproduced here with permission