The company could be stuck in the event that the market bottoms out and the cryptocurrency starts to take its toll once again.
Bitcoin (BTC) is in short supply at Tesla, even as its CEO predicts that US inflation has peaked.
Speaking at Tesla’s 2022 Annual Shareholders’ Meeting on August 5, Elon Musk predicted that an upcoming US recession would be “mild to moderate”.
Musk on costs: “The trend is down”
Recently, after selling off nearly all of its $1.5 billion BTC holdings, Tesla is seeing the emergence of exactly the kind of economic landscape in which risky assets thrive.
During a Q&A session at the annual meeting, Musk revealed that six months’ worth of goods for Tesla parts were cheaper, not more expensive.
Commodities are on a downward trend, he said, indicating that inflation has peaked.
“We’ve had some insight into where prices are heading over time, and what’s interesting we’re seeing now is that most of our items, most of the things that go into one Teslas — not all, more than half the price — are trending down six months from now,” Musk said.
“This is clearly subject to change, but the trend is down, which shows that we are past the peak of inflation.”
The post-inflation recovery with commodities going downhill provides fertile ground for the recovery of risky assets, including cryptocurrencies. Theoretically, this happens because lower inflation means less tightening by the US Federal Reserve, making it easier for venture capital investments.
If strength returns to the market and cryptocurrencies perform better, the trend will be an ironic one for Tesla, which has since withdrawn all of its BTC on its own – with a profit of just 64 million dollars – last month.
At the time, Musk added that BTC could return to the company’s balance sheet at a later date and the decision was not a commentary on Bitcoin.
Meanwhile, the shareholder meeting offered further upbeat macro projections, including a potential US recession that is “relatively mild” and lasts about 18 months. Inflation will “fall rapidly,” Musk added.
A more intense race in the second half of 2022
Musk’s sarcastic comments aren’t lost on crypto commentators and other voices that have bet on a stock rally here to stay.
Among them is Fundstrat Global Advisors, which this week noted that markets had found a historic half-year low before the Fed stopped tightening through major rate hikes.
As a result, the company predicts the second half of 2022 could take the S&P 500 to 4,800 points – a boon for the crypto market that remains highly correlated with overall stock market moves.
As I reported, more details on Bitcoin’s potential return came from the world’s largest asset manager this week. BlackRock, with over $9 trillion in assets, has partnered with US exchange Coinbase to bring cryptocurrency exposure to customers.