Tesla Stock Resembles Bitcoin Bubble, Could Also Plunge Soon, Says Analyst

KEY POINTS

  • An analyst noted how Tesla’s daily price chart mirrors Bitcoin’s weekly price from 2016 to 2017
  • Tesla stock, currently trading at $372.72, rallied to $498 on Aug. 31
  • The analyst said both assets had “a great story” behind them and a lot of liquidity

An analyst has observed that Tesla’s recent stock action has closely resembled Bitcoin, suggesting that the electric car maker’s stock is currently in a bubble. 

Julian Bridgen, the co-founder of macroeconomic research firm MI2 Partners, says Tesla’s price behavior is comparable to that of Bitcoin in 2017 when it hit near $20,000 in a massive rally but then dropped 58% after two months, Cointelegraph reports.

Tesla stock (TSLA) hit $498.32 on Aug. 31 in a rally that started at $72.24 on March 18. The stock pushed past $500 on Sept. 1 but dropped $400 three days later. Its lowest closing level in the last seven days was $330 and closed Friday at $372.72. This was a recovery of 12.46%.

TTesla’s stock is comparable to the weekly fractal of Bitcoin from 2016 to 2019, Bridgen said. He tweeted that both assets had a “great story” and lots of liquidity before a classic bubble chart.

Bridgen compared Bitcoin’s weekly chart with Tesla’s daily chart. The difference between them is that Tesla is a publicly-traded company while Bitcoin is a digital asset that is increasingly becoming a store of value. The store of value narrative is what is driving the behavior of Bitcoin’s price, prompting investors to consider the benchmark cryptocurrency over other investments, Cointelegraph reported. For example, billion-dollar company MicroStrategy recently purchased $250 million worth of Bitcoin as a capital allocation strategy to protect the firm against inflation.

In comparison, Tesla’s value depends on company performance, Cointelegraph added. Factors that affect Tesla’s price include upcoming events such as its announcement of a new and better battery technology. 

As for Bitcoin, the benchmark cryptocurrency closed Sunday at $10.354 and is currently trading sideways at that level. The cryptocurrency is yet to close below $10,000 and analysts are pointing to this as a bullish sign. In a tweet, Three Arrows Capital CEO Su Zhu said he is surprised that Bitcoin has shown strength at $10,000 but doesn’t discount the possibility of dropping more to $8,800.

Tesla's surprise second-quarter profit positions it to potentially join the S&P 500 Tesla’s surprise second-quarter profit positions it to potentially join the S&P 500 Photo: AFP / STR

Leave a Reply

Your email address will not be published. Required fields are marked *