Tesla’s Bitcoin Bet Holds a Lesson for CFOs Facing Tighter Credit

Credit is tightening on several fronts. In September, the Fed raised interest rates for the first time since 2023, prompting major U.S. banks to raise the prime rate to 7 percent, the benchmark rate for many business credit lines. In private markets, Apollo’s $26 billion flagship credit fund for individual investors capped withdrawals for a third consecutive quarter after investors sought to withdraw nearly three times the amount the fund would pay out. When investors are waiting in line to access their own money, businesses should prepare for credit to become harder and more expensive to obtain. The time to plan for that is before the company needs the cash. 

The challenge is especially visible among companies making major bets on their future growth. Tesla’s latest earnings offer a case in point. The company delivered nearly half a million vehicles in the third quarter, about 2 percent fewer than a year earlier, while net income attributable to common shareholders fell 43 percent to $787 million. At the same time, Tesla expects capital spending to exceed $20 billion in 2026, as it pours resources into A.I., robotics and other projects. The results underscore the competing demands on the company’s capital as it pursues ambitions beyond electric vehicles. 

Against that backdrop, Tesla’s Bitcoin holdings offer an unusual window into how a company manages liquidity and financial flexibility. As of the second quarter of 2026, Tesla held 11,509 bitcoin, recording a paper loss of $112 million on the position without selling. That remaining stake is part of a much larger investment the company began unwinding in 2022, amid Covid-19-related lockdowns in China, when it converted roughly 75 percent of its Bitcoin holdings for roughly $936 million in cash. 

Elon Musk said the sale “should not be taken as some verdict on bitcoin.” The company was holding about $18 billion in cash at the time, so it was not facing an immediate cash shortage. Tesla chose to convert a volatile asset into cash, giving itself more certainty and flexibility at a moment of operating uncertainty. 

At current prices, the bitcoin Tesla sold would be worth more than twice what the company received. The lesson here has little to do with whether bitcoin is a good investment. Whatever you think of bitcoin, look at the choices Tesla has with that asset that most companies don’t have with theirs. Its treasury held an asset with a continuously visible market price that could be converted into cash around the clock without negotiating a sale of a business or waiting for a customer to pay. That gave management a choice between selling the asset, borrowing against it or holding it. Tesla chose to sell. 

Most companies have a very different balance sheet. Their value is tied up in customer receivables, inventory, equipment, leases and whatever cash is in the operating account. These assets have real value, but many lack a readily available market price or cannot be converted into cash quickly. That may not matter when credit is cheap and customers pay on time, but it matters enormously when lenders pull back and cash that seemed available proves difficult to access. 

Working in digital-asset lending at Ledn means thinking constantly about collateral: what it is worth, how quickly it can be sold and what happens when everyone tries to sell at once. Those are questions every company should be asking about its balance sheet now. 

Rank the balance sheet by how quickly assets become cash

A balance sheet can look strong and still leave a company short. An asset’s practical value depends on how quickly it can be converted into cash, and at what cost, when conditions deteriorate. 

Start by listing the company’s assets and ranking them by how quickly they can be converted into cash and what discount might be required to sell them. Treasury bills can generally be sold quickly with little price risk. Receivables may be factored or borrowed against, often at a discount. Inventory and equipment can take longer to sell and may require larger price cuts. Then examine where the cash actually sits. Funds held in a foreign subsidiary, an account subject to covenants or an investment with quarterly redemption limits may be sound on paper but unavailable when the company needs them. Liquidity depends on whether money can be accessed and moved when it matters. 

Finally, assume the company will not be the only one looking for cash. When credit conditions turn, businesses often try to sell similar assets at the same time, adding pressure to prices. Customers may also stretch payment terms, delaying receivables just as cash becomes more valuable. Even assets with active markets can lose value quickly. Tesla’s bitcoin position, for example, recorded a $112 million loss in value in the second quarter alone. Knowing an asset’s price is useful. It does not guarantee that the price will hold. 

Know what those assets are worth today

Many companies only discover what an asset is really worth when they try to sell it. Private-credit investors have recently encountered that problem. Following the latest withdrawal queues, a buyer offered to purchase shares in two large private-credit funds at discounts of 12.5 percent and 17.5 percent to their reported values. Their statement said one number, and immediate liquidity came at another.

This gap between a reported valuation and the price available to someone who needs liquidity is the price of urgency. Companies should understand that gap before they are forced to pay it. Information is king. An up-to-date price is something you can make decisions with. A valuation from last year’s audit is a snapshot with a date on it, not a reliable guide to what an asset could fetch today. If management cannot estimate what its key assets would sell for this month, and how long a sale would take, it should find out. Those answers determine which assets the company can realistically rely on in a cash crunch and which it should preserve.  

Arrange credit while the company doesn’t need it

Lenders are generally more willing to extend credit to businesses that appear unlikely to need it urgently. A credit line arranged while a company’s books are healthy can be far more valuable than one negotiated after a cash shortfall becomes visible to everyone. 

When comparing facilities, the interest rate is the easiest term to compare, but it is not necessarily the most important. A committed facility offers greater certainty than an uncommitted one, which a lender may decline to fund when circumstances change. Companies should scrutinize material adverse change clauses, financial covenants and the conditions under which a lender can freeze or withdraw access to funds. 

Secured facilities require additional scrutiny. If a line is backed by receivables or inventory, ask how the borrowing base is calculated and how often it is reassessed. That base may shrink just as customers take longer to pay or inventory becomes harder to sell. If an asset is pledged as collateral, understand who holds it, how it is valued and what happens if its value falls or the lender runs into financial trouble. 

Borrowing against an asset can allow a company to avoid selling it at an unfavorable moment. But that protection is only as strong as the loan terms: a falling collateral value can trigger additional collateral requirements or a forced sale. 

Stop funding long commitments with short-term money

Businesses are especially vulnerable when they fund long-term commitments with short-term, floating-rate borrowing. As rates rise, financing costs can increase before the underlying investments generate enough cash to cover them. Banks understand this risk. An institution that funds long-term, fixed-rate loans with short-term deposits can find itself exposed when rates change. Companies face a similar mismatch when they rely on short-term credit to finance assets or obligations that take years to pay off. 

Review the balance sheet for those gaps. Where appropriate and available, consider fixing interest rates, extending debt maturities or matching the duration of financing to the assets and commitments it supports. The goal is to reduce the risk that a short-term change in credit conditions forces a business to refinance on unfavorable terms. 

Decide in advance what to sell, borrow against and hold

The most common mistake is not necessarily choosing the wrong source of cash. It is choosing in a hurry. Companies that wait until capital is urgently needed to work out where it will come from may end up selling whichever asset is easiest to liquidate rather than the one that makes the most financial sense. In the process, they could give up an asset they believe has long-term value or accept financing terms they would have rejected under less pressure.  

The alternative is to make the decisions now, using current valuations and realistic assumptions about how markets behave under stress. Identify what the company would sell first, what it would borrow against and what it would try to hold. Establish the conditions that would trigger a move from one option to another, and revisit the plans as market conditions change. 

Tesla’s 2022 sale shows why it matters to have options. The company could convert part of its bitcoin holdings into cash quickly, even if doing so meant giving up the possibility of future gains. Whether selling was the right investment decision is a separate question. The point is that management had a choice and could act before a cash crisis forced its hand. 

A company does not need to own bitcoin to benefit from that lesson. It needs to understand the assets on its balance sheet, know what they are worth in the market today and decide in advance how to use them before the market decides for it.

Thomas Wu is chief financial officer of Ledn, a digital asset lender founded in 2018 that has serviced more than $10 billion in loans across more than 100 countries.