Inflation surged and interest rates rose in 2022, prompting Bitcoin to plummet below $20,000, which in turn led Tesla to sell roughly 75% of its holdings in Q2 of that year.

Tesla's latest earnings report has reignited questions about its decision to offload the majority of its Bitcoin holdings during the 2022 crypto crash, an exit that now appears to be a costly move.

The company's digital assets are currently worth $1.24 billion, up from $722 million a year ago. Tesla booked $284 million in Bitcoin-related gains during the second quarter (Q2), which helped boost total net income to $1.17 billion. However, if the company had held onto its full Bitcoin position, that number could've been much higher.

In early 2021, Tesla invested $1.5 billion in Bitcoin, describing it as a means to "diversify and maximize returns" on its cash reserves. At the time, BTC traded around $44,000. However, as inflation surged and interest rates rose in 2022, Bitcoin plummeted below $20,000, prompting Tesla to sell roughly 75% of its holdings in Q2 of that year.

Bitcoin is now worth more than $115,000, up 23% year-to-date, outperforming the S&P 500 and Nasdaq's modest 9% gains. CNBC estimates that if Tesla had held onto its whole stash, it would now be worth around $5 billion, compared to the current $1.24 billion. The $936 million worth of Bitcoin Tesla converted to cash in 2022 alone would now be valued at over $3.5 billion.

The crypto rebound has been fueled by cooling inflation, institutional buying into BTC ETFs, and President Donald Trump's pro-crypto stance, including pledges to loosen regulations and establish a strategic Bitcoin reserve.

Meanwhile, Tesla stock is down nearly 19.5% this year, under pressure from sliding EV sales, shrinking margins, and CEO Elon Musk's polarizing political entanglements with the Trump administration.

Despite the missed upside, Tesla remains among the top 10 corporate holders of Bitcoin, according to bitcointreasuries.net.

On Stocktwits, however, sentiment is slightly more upbeat for Tesla than for Bitcoin: BTC's sentiment score recently dipped into 'bearish' territory, while Tesla's remained relatively steadier at 'neutral,' as several investors have bought into Musk's vision for AI-driven autonomous driving and humanoid robots driving future value.

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