Speaking at Tesla’s 2022 Annual Meeting of Stockholders on Aug. 5th, Elon Musk predicted that any upcoming recession in the United States would only be “mild to moderate.” The Tesla CEO further opined that United States inflation has already peaked.
Despite these claims, the electric cars manufacturer disclosed in July the sale of 75% of its bitcoin holdings in the second quarter, adding $936 million in fiat to its balance sheet.
Recovery in Risk Assets
Tesla is witnessing the emergence of exactly the kind of economic environment in which risk assets thrive. According to them, a comeback in risk assets, including cryptocurrencies, will be possible at the end of an inflationary phase, and the subsequent decline in the price of commodities.
Theoretically, this would occur in the event that the U.S. Federal Reserve implement less strict policies due to the hyperthetically reduced inflation, thereby creating favorable conditions for riskier investments.
During a Q&A session at the annual meeting, Musk highlighted that the six-month commodities cost for Tesla parts is already dropping, which is an indication to the CEO that inflation has already peaked.
“We sort of have some insight into where prices are headed over time, and the interesting thing that we’re seeing now is that most of our commodities, most of the things that go into a Tesla — not all, more than half the prices — are trending down in six months from now,” Musk said, “This could change, obviously, but the trend is down, which suggests that we are past peak inflation.”
The stockholder meeting provided more upbeat macro forecasts, such as any hypothetical U.S. recession being “relatively mild”, and lasting approximately 18 months. According to Musk, inflation will soon “drop rapidly.”
On the Flipside
- The crypto market is regaining strength, which would be ironic for Tesla, which rid itself of virtually all of its BTC last month for a profit of just $64 million. At the time of the sale, Musk stressed that the decision was not a criticism of Bitcoin in general, and that BTC could make a return to the company’s balance sheet at a later time.
- Musk further explained that the company sold its Bitcoin holdingsdue to concerns about its overall liquidity.
Why You Should Care
Tesla, according to CoinGecko, possessed 48,000 bitcoins before the big crypto crash and the sell off of company’s assets. When the market plummeted, the company effectively lost around $412,859,869 in terms of the value of its investment in bitcoin.
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