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Comment by nprz | Hacker News Reader

Reason behind the 10% sell off according to Elon https://twitter.com/elonmusk/status/1386821144037236737?s=20

> Tesla sold 10% of its holdings essentially to prove liquidity of Bitcoin as an alternative to holding cash on balance sheet.

Can someone who understands finance explain what this means in layman’s terms? How is it just saying they sold Bitcoin so they could have cash on hand?

According to Elon they sold 10% of their Bitcoin just to show investors that they could sell Bitcoin if/when they needed cash in the future (so proving that it's not just a dead asset on their balance sheet).

I'm not great at finance but it reads to me as they sold the BTC as proof of concept that the BTC they are holding can be liquidated (turned back into USD) very easily.

Having $XM USD in BTC means nothing if you can't convert it back into USD. This sell (at least according to Elon) was done just to prove to Tesla/Board/etc/whatever that it was fine to hold BTC because they could convert back to USD if needed at any time.

what if they were wrong? they'd both crash the BTC price for everyone, plus stick themselves close to a billion dollar write down (is Bitcoin 'inventory') or capital loss. I doubt this carefully organized stunt overlooked the importance of ensuring the market pump punchline hit.

that is to say, I don't think tesla had any worries that someone wasn't ready to take the other side of their ask, very likely the round trip was already arranged from the day they agreed to take a billion in BTC onto their balance sheet. if elon can 'prove' the market has liquidity, everyone backing Bitcoin wins big, Tesla included.

If you buy a Bitcoin at $5k and it goes up in value to $50k, you still can't recognize it as a $50k asset. This was a demonstration that the real world value of their holdings is (currently) greater than book value.

It doesn't really mean anything in layman's terms. It's a transparent lie: If one were to actually take it at face value it would imply that Tesla plowed $1.5B into a "store of value" whose liquidity they were unsure of. It would make no sense. If they wanted to test liquidity they could have quietly bought and sold just the 10% position before YOLOing in the $1.5B.

Tesla simply sold just enough BTC to book enough profit to meet quarterly EPS estimates.

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