Many of you probably know about the existence of Tesla and Bitcoin. However, few people thought about how the brainchild of Elon Musk and the primary digital asset in the world are connected. At first glance, it seems that Tesla and Bitcoin are entirely different things. Tesla is an electric car company developing non-standard futuristic cars such as the Cybertruck and artificial intelligence that allows you to drive on autopilot. Bitcoin is the response of users to the traditional financial system. It is considered by some to be the currency of the future, entirely independent from central banks, i.e. not controlled by them in any way.
Recent events have brought Tesla and Bitcoin closer together. Tesla bought the equivalent of $ 1.5 billion in bitcoin a few months ago. For many large enterprises with significant capital, creating investment portfolios to keep free funds from inflation is common. Tesla’s bitcoin purchase has sent BTC’s value to record highs, and now it seems as though the electric car maker and bitcoin and more connected than ever.
Tesla’s and Bitcoin’s Connection
When looking at fluctuations in the price of Tesla’s stock prices and bitcoin’s value, we can see that they exhibit behavior that is sometimes very similar. But how can this fact be explained?
- Retail Investor Behavior. The main reason is retail investors. The topic of investing is becoming popular in many communities (for example, Reddit). People read articles, get inspired, and go to invest their hard-earned money. The focus of such investors is on popular destinations (Tesla and Bitcoin are among them).
- Community support. You need to understand that many people now share the core values of Tesla and Bitcoin. There is a strong desire to undermine two large existing markets: energy and financial. Tesla is actively promoting renewable energy sources. Now we are talking about cars powered by electricity. In the future, the production of vehicles powered by hydrogen or solar energy is not excluded. Bitcoin, in turn, is trying to become an alternative to the modern financial system. Banks and influential people regulate markets. In “digital gold,” people get the opportunity to be independent of them, thanks to limited emission and decentralization. In the case of some other cryptocurrencies, the anonymity of transactions is also guaranteed.
- Domination. Here it is essential to take into account the dominance factor of Tesla and Bitcoin. Bitcoin, according to experts, occupies 70% of the entire digital currency market. The crypto sphere is now associated with it. Tesla, in turn, is the leader in electric cars. Now the company accounts for 26% of the market. And every year this figure is slowly but surely growing. While other major manufacturers (such as BMW, Audi, and Volvo) are also developing their own line of electric cars, Tesla still has a lot of confidence from customers. Keep in mind that apart from making cars, Tesla also produces batteries and software that other companies can purchase.
- The genius of the creators. I would also like to note the genius of the people who created Tesla and Bitcoin. Elon Musk, the creator of Tesla, is considered a genuine madman, constantly challenging common sense. No one would have thought that a private company would be able to create reusable rockets or cover the whole world with the Internet using the Starlink global satellite system. Note that Musk positions himself not as a director or manager but as an engineer. The same goes for Satoshi Nakamoto, the brilliant mathematician, and cryptographer who invented the world’s first digital currency. By the way, even now, no one knows who the mysterious Nakamoto is.
- The love of Tesla and Bitcoin on Wall Street. Tesla recently joined the S&P500. Its market capitalization was higher than that of other participants. This turn of events prompted institutional investors to acquire $80 billion in shares of the company to balance their own index funds. Wall Street also accepted Bitcoin: large financial institutions are actively purchasing it, and payment systems (for example, Paypal) have added the ability to buy it.
We need to come to terms with the fact that Tesla and Bitcoin are highly volatile. Innovation has always been characterized by inconsistency. Bitcoin has dropped in value many times, and perhaps it will be destined to fall more than once. These are the rules of the game. If you have a reserve of patience, then there is nothing to be afraid of.
A Negative Side of Tesla and Bitcoin correlation
There are also negative aspects of the strong Tesla and Bitcoin correlation. Problems in one of them can cause a chain reaction in the other. The fact that Tesla owns a large number of bitcoins adds fuel to the fire. Rumor has it that Elon Musk himself bought coins for himself. This makes Tesla a major player in the market, which is partly what allowed Bitcoin to reach unprecedented heights.
The purchase of bitcoins gave impetus to Tesla itself. Firstly, the shares have risen in value. And the possibility of purchasing a car using Bitcoin has generated a positive response from the community. Therefore, several unpleasant circumstances (for example, the sale of bitcoins by Tesla or the ban on Bitcoin by the US financial regulator) can create many problems. It shouldn’t be forgotten that some of BTC and Tesla stock’s high value come from strong community support. The negative changes in Tesla and Bitcoin could set a precedent that, in the foreseeable future, few people will want to take risks and create something beyond the understanding of our society.
Tesla and Bitcoin are highly correlated in 2021. And this is a fact that is obvious to everyone. There are many reasons for this:
- The community’s support
- The genius of the creators
- The dominant position in the market
With a high degree of probability, the trend will continue in the future. This development of events has many positive aspects and is closely related to the development of technology and progress, as well as a gradual departure from the traditional state of affairs.