Felix Ng
Crypto industry experts are largely unfazed by Tesla’s decision to sell 75% of its Bitcoin (BTC) holdings, saying it’s a fairly typical strategy for companies to improve cash flow during economic slowdowns.
On Wednesday, the electric vehicle manufacturer revealed that it had sold 75% of its Bitcoin holdings in Q2, adding $936 million in fiat to its balance sheet.
During a conference call, Tesla CEO Elon Musk noted that the sale “should not be taken as a verdict on Bitcoin,” explaining that the move was due to liquidity concerns given the continued COVID-19 lockdowns in China.
“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 maximize our cash position:”
“We are certainly open to increasing our Bitcoin holdings in the future.”
Asked by investors during the earnings call whether he saw Bitcoin as a long-term asset, Musk said the cryptocurrency was a “sideshow to the sideshow” of Tesla’s main goal, which is “to accelerate the advent of stable energy.”
“Cryptocurrency is not something we think of a lot,” he said.
Markus Thielen, chief investment officer at Singapore-based digital asset manager IDEG, told Cointelegraph that Tesla likely sold off its Bitcoin as it was “seen as a distraction from their core business:”
“I would not be surprised if Tesla keeps nibbling in Bitcoin when Bitcoin stabilizes, otherwise they would have sold 100%.”
Comparison site Finder’s share trading expert Kylie Purcell explained that the electric car manufacturer hasn’t been alone in its decision to “shore up capital in cash currencies.”
“With the world heading into an economic slowdown and possibly a recession, it’s not unusual for investors and companies to move capital away from more volatile assets into fiat currency,” she noted.
She also added that while the price of Bitcoin dipped following the announcement, there are already signs of recovery.
On Wednesday, Bitcoin’s price fell approximately 2.6% following Tesla’s announcement and has returned to $23,299 at the time of writing — tracking close to its one-month high, meaning that the crypto community may not have been too concerned by the announcement.
The muted reaction to the sale played out differently from the announcement in February last year that Telsa had scooped up $1.5 billion in BTC to add to its balance sheet and was planning on accepting Bitcoin as payment for certain products (though this was later scrapped).
The news at the time saw Bitcoin’s price immediately jump by almost $3,000, bringing the cryptocurrency to a new all-time high above $43,000.
Swyftx’s head of strategic partnerships, Tommy Honan, told Cointelegraph that Tesla’s decision to buy Bitcoin last year was “as important a moment as you can imagine for digital assets:”
“It almost gave other businesses permission to put crypto on their balance sheets and we saw a lot of big institutional investors, as well as small and mid-cap companies flood into the market from that point.”
“Musk said the sale wasn’t a verdict on Bitcoin, just a cash play, and it looks like the market has taken him at his word. Bitcoin’s price has stabilized over the last 24 hours and we’d be surprised if other big investors followed suit, especially given the current price of Bitcoin.”
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Zhiyuan Sun
With the transition to a scalable, energy-light proof-of-stake blockchain at play for Ethereum, many have cast doubts on the popular coin’s future, given the magnitude and complexity of the Merge upgrade. But, among prominent stakeholders, one particular project remains heavily bullish on Ethereum’s future, which is none other than layer-two scaling solution Polygon.
At the annual Ethereum Community Conference in Paris, Cointelegraph’s events manager, Maria A., spoke to Polygon’s vice president of growth, Mihailo Bjelic, regarding the topic. Here’s what Bjelic had to say regarding the Merge:
"This is an upgrade on a live network that has millions of users, billions in capital, and tens of thousands of applications. It is never easy, but the Merge has been in the works for over two years. All the testnets have been successful, the code has been audited, etc., so I think we are more than ready for the upgrade."
Bjelic then explained that it’s more than likely that Ethereum will endure the bear market and recover: “Two reasons. First, it's the home of integration. It's where all the developers are, it's where 90%-plus of activity is happening. Projects focused on the money will disappear, but the true developers will stay.” He continued: “The second reason is that Ethereum is the most secure, decentralized and programmable blockchain in the world, by far. It is perfectly positioned to be the center of this multichain web that we're trying to build to potentially reach to billions of users.”
Concurrent with this interview, Polygon announced on Wednesday that it launched the Polygon zkEVM, or zero-knowledge Ethereum Virtual Machine, that would potentially scale the blockchain’s transaction output to even greater levels. “It has full EVM compatibility, scalability and security using the power of zero-knowledge proofs. I would say this is a major breakthrough in terms of technology,” said Bjelic. On the adoption side, Polygon has onboarded over 30,000 applications and 140 million user wallets since its inception.
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Turner Wright
Department heads at Coinbase have weighed in on the market downturn amid solvency concerns surrounding Three Arrows Capital, Celsius Network and Voyager Digital, saying the crypto exchange had “no financing exposure” to these companies.
In a Wednesday blog post, head of Coinbase Institutional Brett Tejpaul, head of prime finance Matt Boyd, and head of credit and market risk Caroline Tarnok said Coinbase had not engaged in the “types of risky lending practices” exhibited by Three Arrows Capital, Celsius and Voyager, claiming the firms utilized “insufficient risk controls.” According to the three co-authors of the post, crypto companies faced the possibility of insolvency caused by “unhedged bets,” large investments in Terra and overleveraging with venture capital firms.
“The issues here were foreseeable and actually credit specific, not crypto specific in nature,” said Tejpaul, Boyd, and Tarnok. “Many of these firms were overleveraged with short term liabilities mismatched against longer duration illiquid assets. We believe these market participants were caught up in the frenzy of a crypto bull market and forgot the basics of risk management.”
A court in the British Virgin Islands reportedly ordered the liquidation of Three Arrows Capital. Voyager Digital filed for bankruptcy in July, later announcing that its plan to restore users’ crypto could depend on funds from any proceedings with Three Arrows Capital, which failed to repay 15,250 Bitcoin (BTC) and 350 million USD Coin (USDC) loans. Celsius also filed petitions for Chapter 11, with the platform’s lawyers using an unusual legal argument to avoid restoring users’ funds.
Though Coinbase said it had a record of “no exposure to client or counterparty insolvencies” and “no changes in access to credit” for its users, the crypto exchange is still operating within a bear market that Grayscale predicted could last until 2023. Since May 4, shares of Coinbase stock have fallen more than 42% to reach $75.27 at the time of publication. CEO Brian Armstrong also announced in June that the exchange planned to cut 18% of its staff, citing concerns about a possible crypto winter.
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This Daily Dose was brought to you by Cointelegraph.
