The price of bitcoin dipped, hitting below $46,000 after rising close to $55,000 in the last few days. Elon Musk, the guy who recently invested $billions in the “wealth product”, said the product was overvalued. That tweet rattled some people – and they panicked, and sold their coins.
Within the freedom of academic analysis, this village boy can freely write that Elon Musk has made a mistake, and scored an own goal (as in football) [I know, who’s that guy saying that Musk made a mistake!]. What Elon did not remember is this: if your $billions are tied to bitcoin, and if you shoot it down, your company valuation will follow. So, when he made that tweet, I said “really, he wants to attack his company since some investors may not be comfortable seeing billions of Tesla assets disappear”.
Updated after this post, I saw this quote from Wedbush Analyst, Dani Ives. He provided this reason as the cause of the recent Tesla plunge in the stock markets. This recent plunge has pushed its total loss since the Bitcoin investment to 25%
Shares of Tesla at one point plunged more than 10% Tuesday morning, pushing their losses since February 8—when the firm first disclosed its $1.5 billion bitcoin investment—to more than 25%.
That crippling blow to Tesla stock has erased about $215 billion in the firm’s market capitalization, which stands at about $620 billion, since the investment, at which time the firm’s market cap was near a high of $844 billion.
The recent plunge comes as bitcoin prices tank about 7% after Tesla’s billionaire chief, Elon Musk, said over the weekend that the cryptocurrency’s prices looked “a little high,” Oanda Senior Market Analyst Craig Erlam said Tuesday morning.
In a note to clients Tuesday, Wedbush analyst Dan Ives said that “for both good and bad,” Tesla shares are now “heavily tied” to bitcoin prices—a development that’s driving a selloff among cautious investors.
Yes, those coins he loaded are now part of Tesla’s balance sheet and whenever there is a fluctuation on BTC, investors care! That is the biggest risk for any company which wants to hold assets in BTC, and trading publicly.
Simply, these two factors explain why Tesla is falling with BTC experiencing some shocks:
- US Treasury Secretary Janet Yellen warned that bitcoin “I don’t think that bitcoin … is widely used as a transaction mechanism, …It’s an extremely inefficient way of conducting transactions”. That woman is the most powerful voice in the world of finance and people are reading her mind!
- Elon Musk by loading Tesla’s assets on bitcoin magically connects his balance sheets to bitcoin. So, if BTC sneezes, expect turbulence on Tesla stocks. Why? While Tesla’s earnings calls happen quarterly, BTC changes hourly, meaning that Tesla has no hiding place.
Add both, Tesla was off 22% but is expected to recover as BTC recovers! But momentarily, due to this paralysis for Tesla, Jeff Bezos is back as the richest guy in the world.
Treasury Secretary Janet Yellen issued a warning Monday about the dangers that bitcoin poses both to investors and the public.
Despite a sharp slide in price to start the week, the cryptocurrency continues to trade above $53,000 as it has received boosts from various sources. Elon Musk’s Tesla recently made a substantial purchase and has said it will accept bitcoin for transactions.However, Yellen said there remain important questions about legitimacy and stability.
“I don’t think that bitcoin … is widely used as a transaction mechanism,” she told CNBC’s Andrew Ross Sorkin at a New York Times DealBook conference. “To the extent it is used I fear it’s often for illicit finance. It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.”
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