Bitcoin recovers after falling due to news that Tesla has sold 75% of its holdings

A representation of the virtual currency Bitcoin is shown in this illustration taken on October 19, 2021. REUTERS/Edgar Su/File Photo

NEW YORK, July 20 (Reuters) – Bitcoin rebounded after a short sell-off late on Wednesday sparked by news of electric car maker Tesla. (TSLA.O) It has sold about 75% of its virtual token holdings.

Tesla CEO Elon Musk cited concerns about his company’s “total liquidity” as the reason for the sale.

The world’s largest cryptocurrency was up 1.04% at $23,494.57, after slipping 0.5% to $2,268.92 in the news.

Tesla sold $936 million worth of bitcoin in the second quarter, more than a year after the company bought $1.5 billion of the cryptocurrency at the height of its massive growth and popularity.

Musk has been an outspoken supporter of cryptocurrency. His statements about the future of cryptocurrency and disclosures about his ownership of digital assets often boost the price of the Dogecoin and Bitcoin.

On Tesla’s earnings call, Musk said the main reason for the sale was uncertainty about shutdowns due to COVID-19 in China, which created production challenges for the company.

“It was important for us to maximize our cash position,” Musk said. “We are certainly open to increasing our bitcoin holdings in the future, so this should not be taken as a judgment on bitcoin. It is just our concern about the company’s overall liquidity.”

Musk added that Tesla did not sell any of the dogecoin, the meme-based cryptocurrency that he promoted.

Tesla accepted bitcoin as a payment for less than two months before stopping in May 2021. Musk said the company could resume accepting bitcoin once it conducts due diligence on the amount of renewable energy needed to mine the currency.

Bitcoin has been in recovery mode so far this week, in line with the stock market, as investors look more optimistic about the US Federal Reserve’s ability to rein in decades-high inflation.

(Additional reporting by Hannah Lang, Gertrude Chavez-Dreyfus and Nevedita Ballou; Editing by Margarita Choi, Richard Boleyn and Richard Chang

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