Those tech companies would lose USD 5 billion if they decided to sell their Bitcoin holdings right now. When they started buying BTC, many companies and investment funds saw it as a precedent for a new trend within the business world.
After rising to nearly USD 70,000 per unit, the price of Bitcoin (BTC) has not stopped dropping, accumulating months in the red. Despite reigning uncertainty, the pioneering cryptocurrency is between USD 18,000 and USD 22,000. That level causes technology companies to see the value of their investment decrease.
The influx of new private investors in the ICO boom characterized the 2017 bullish run of Bitcoin. The next rally came after the halving in 2021, with the arrival of new investors like technology companies, investment funds, and even states.
Tesla made the starting signal for the public by purchasing USD 1.5 billion worth of Bitcoin, 8% of its available cash. MicroStrategy, led by Michael Saylor, had previously bought significant amounts of BTC, which he has not stopped doing. Block, formerly known as Square, has not only acquired the cryptocurrency to make it part of its treasury but is working on its adoption.
That practice surprised companies and investment funds, as it seemed to precede a new trend within the business world. Since Bitcoin has dropped so quickly, the red numbers and virtual losses for their bet on it are surfacing. According to Bloomberg, if Tesla, MicroStrategy, and Block sold their combined treasury at current prices, they would lose USD 5 billion.
Tech Companies Might Choose to Hold or Sell Their Bitcoin Positions
The loss in the value of the pioneering cryptocurrency has caused concern in the crypto community. In the case of lack of liquidity or trouble, some companies could sell part or all of their crypto assets. That decision would push the price of Bitcoin toward a decline.
The documentation filed with the SEC states that Tesla has sold 75% of its Bitcoin reserves, obtaining USD 936 million. The electric car company did so when the cryptocurrency traded at USD 28,000 in the second quarter of 2022.
Elon Musk explained the reasons for such a move at a meeting of Tesla investors. He claimed they sold that amount of Bitcoin to have enough cash liquidity due to a new COVID-19 outbreak in China. Musk also cited that Tesla might buy again, as the company sees cryptocurrencies as a product parallel to its accounts.
Some began to fear that this might create a chain effect, exceeding the supply of Bitcoin and leading to further price drops. Musk took to Twitter to play down the sale, saying that only 25% of their Bitcoin would remain after selling 75% of their holdings.
After the sale of Tesla, MicroStrategy became the company with the highest amount of Bitcoin in its treasury. Saylor has repeatedly stated they will not sell their Bitcoin assets, claiming they were ready for this scenario. He has said that they might even resist levels below USD 10,000.
There seems to be no reason for these investors to sell part or all of their Bitcoin reserves. However, that mainly depends on geopolitics and the state of the macroeconomy.
By Alexander Salazar
