Tesla’s meteoric tear is unraveling this month as experts start to worry that the stock’s performance could start to mimic bitcoin’s extreme volatility after the firm disclosed a $1.5 billion investment in the world’s largest cryptocurrency earlier this month.
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 sell-off among cautious investors.
Though he remains bullish on Tesla’s stock, Ives also pins the recent losses to the firm halting sales of its lowest-priced Model Y and ongoing price cuts that have led to demand concerns among Wall Street analysts.
“The electric-vehicle space is in the early days of playing out,” Ives said Tuesday, noting that Tesla dominates the market, which is set to grow to an estimated $5 trillion over the next decade. “The market… will have many winners around the globe–especially with a President Joe Biden-driven green tidal wave on the horizon in the U.S. However, by weaving bitcoin into the mix, Tesla shares now have added volatility and noise driving the emotional debate around its name.”
Tesla shares soared by more than 740% in 2020. The stock is now at its lowest level since before it entered the S&P 500 in late December.
“The fall that has taken place since [Musk’s tweet] shows just how wild an instrument bitcoin is, how overbought it has become and how influential the Tesla CEO now is in the space,” Erlam said Tuesday. “I’m not sure any of that is a good thing.”
$155 billion. That’s how much 49-year-old Musk is worth, according to Forbes. His net worth is down $12 billion Tuesday after falling $12 billion Monday.