What Would Happen if Elon Musk Decided to Flip Tesla’s $1.5b in BTC for Cash?

How Much Bitcoin does Tesla Own?

Tesla bought approximately 37,500 Bitcoin for a price of $1.5 billion dollars. So even if this sounds like a lot of Bitcoin, it is not. It is only about 0.17% of the total supply and 0.20% of the current circulating supply.

There are several other entities that own just as much, or more Bitcoin than Tesla. These entities include MicroStrategy, which now owns almost 100,000 Bitcoin, and Greyscale which owns 570,000 Bitcoin.

Shareholders are the Owners of the Bitcoin

One important distinction to make is that Elon Musk is not the owner of the Bitcoin bought by Tesla. The media is making it out to be that Elon Musk is the buyer of all this Bitcoin. While the decision was his own, the ownership is not.

Tesla the publicly traded S&P 500 company is the owner of the Bitcoin, and people all over the world are the owners of Tesla. In fact, there are more than 2000 institutional investors that own Tesla stock including mutual funds and investment groups. Some of these funds are owned by countries including Norway. The stock is owned in something called a sovereign wealth fund, which is a fund that is co owned by all citizens of Norway. In effect, 5.3 million Norwegian citizens own Bitcoin, through Tesla.

Tesla Selling Bitcoin Would Bring FUD

While Tesla selling Bitcoin wouldn’t directly drop the price, the market sentiment that follows surely could.

Elon Musk has amassed a curious ability to move the markets with his tweets. This is exemplified by his tweets about Dogecoin in December, and his announcement of the purchase of Bitcoin for Tesla.

Curiously enough, he is currently under investigation by the SEC for his tweets about Dogecoin. At any rate, Elon Musk has a massive array of followers. If Musk buys Bitcoin, so will they. If he says the price of Bitcoin is a little high, they will sell.

Tesla Wouldn’t Sell Their Bitcoin in a Market Order

Companies with significant holdings in Bitcoin would not dump their Bitcoin on the market through a market order. Instead, they would strategically place limit sell orders at regular intervals (ex. $2000 per second).

Just like a company wouldn’t put in a market order for $1.5 billion worth of Bitcoin, they too wouldn’t put in a sell order. This would be an extremely unsophisticated and costly method of obtaining or disposing of Bitcoin. A market order of this size would surely drop the market significantly for a short period of time, and only on the exchange that it occurred on. Tesla can get a lot more money should they choose to sell, by selling a little bit at a time.

Tesla Would Make A Lot of Money by Selling Bitcoin

You might have seen the headline that Tesla has made more profit in Bitcoin than selling electric cars. This is not exactly true, as Tesla hasn’t sold their Bitcoin. They only make a profit if they sell. Otherwise, the Bitcoin is simply just worth more than what they paid for it.

This is a pretty interesting factoid though, as it makes you wonder what Tesla would do with an extra billion dollars. Perhaps Tesla would build another GigaFactory, or use the money to build charging station infrastructure. Maybe it could be used to bring the solar shingles to market sooner.

The point is, that Elon Musk has managed to do the impossible, and build an electric car company from scratch. An extra billion dollars would no doubt create more degrees of freedom for the electric vehicle company.

Elon Musk Could Trigger Further Investigations

As mentioned earlier, Elon Musk is currently under investigation by the SEC for his tweets about Dogecoin. If Tesla sold their Bitcoin at a profit, it may trigger the SEC to look a little harder at Elon Musk’s dealings in cryptocurrency.

Depending on how you look at things, Elon could be seen as manipulating the markets with his twitter account. I think the point that is up for debate is whether or not Elon is doing this intentionally. The flip side of this, is the scenario that I think is more likely. That is, that Elon simply has a cult-like following that attach themselves to every word and tweet that comes out of Elon’s account.

The fascinating aspect of the SEC investigation into Elon Musk is there is no real precedent for this situation. There has never been someone as influential as Elon Musk that has been able to pump niche cryptocurrencies like Dogecoin. If I’m speculating on the results, I think the SEC will find that Elon has never owned Dogecoin. I think he finds it just as silly as the rest of money. After all, Elon did say that Bitcoin is slightly less bs than fiat.

Tesla Didn’t Buy Bitcoin to Sell a Couple Months Later

I find it unlikely that Tesla bought Bitcoin simply to sell it at a profit a couple months later.

The entire strategy being employed by dozens of enterprises is using Bitcoin as a store of value. The narrative is that Bitcoin is a great store of value, rather than a great short-term profit taking strategy.

These large businesses are not likely to shift strategies after a good month on the market. In comparison to what they could make by holding for years or decades, a billion dollars of profit is just a drop in the bucket. These companies typically are looking at their businesses with a two, five, and ten year outlook. Bitcoin fits this type of investment philosophy exactly.

Just like MicroStrategy, Tesla is in Bitcoin for the long haul.