Tesla’s extends 2-day plunge to 20% as epic rally takes a breather

elon musk tesla
Elon Musk

  • Tesla tumbled as much as 12.2% on Tuesday, extending losses following a similarly sized plunge the session prior.
  • The sell-off has dragged shares to their lowest since December and led CEO Elon Musk to relinquish his title as the world’s richest person.
  • Tesla’s latest slump follows confusion over Model Y availability and risk from plummeting bitcoin prices.
  • Watch Tesla trade live here.

Investors continued to dump Tesla on Tuesday, dragging shares to their lowest level since late December.

The automaker sank as much as 12.2% after markets opened. The drop is set to extend a three-day losing streak for Tesla stock that intensified at the start of the week. The Wednesday-to-Monday losses have seen Tesla’s total market cap drop by $80 billion and led CEO Elon Musk to relinquish his title of the world’s wealthiest person.

Tesla traded at a record high of $900 just one month ago as extreme bullishness toward the company’s growth fueled massive gains. Valuation concerns cut into the rally and saw shares waver around $850 through much of February.

Shares closed 9% lower on Monday after the company reportedly halted new orders for the lowest-price version of its Model Y crossover. Musk clarified in a Monday tweet that the model was still available “off menu,” adding he doesn’t think the vehicle’s range “meets the Tesla standard of excellence.”

The move came less than a week after Tesla slashed the variant’s price to $39,990 from $41,990. The automaker also lowered prices for longer-range Model Y versions and its Model 3 sedan.

The price adjustments are “all a poker move” meant to stoke demand for Model Y and Model 3 in China, Wedbush analyst Dan Ives told Insider in an email. Ives has repeatedly deemed China a “linchpin” for Tesla’s continued growth.

The decline was also driven by Musk’s warning of elevated cryptocurrency prices. The CEO took to Twitter on Saturday to caution that bitcoin and Ether prices “do seem high” following the tokens’ recent rallies. Bitcoin surged to record highs earlier in February after Tesla announced it purchased $1.5 billion of the cryptocurrency as a reserve asset.

Musk’s comments contributed to a sharp reversal of the token’s gains. Bitcoin sank below $45,000 on Tuesday, placing the cryptocurrency on track for its biggest single-day loss since March 2020.

Investors are now “starting to tie bitcoin and Tesla at the hip,” Wedbush’s Ives said in a Tuesday note. While the automaker’s investment initially garnered a $1 billion return, the cryptocurrency’s sell-off has pushed some shareholders to sell, he added.

Tesla closed at $714.50 per share on Monday, up 2.8% year-to-date. The company has 25 “buy” ratings, 47 “hold” ratings, and 20 “sell” ratings from analysts.

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Elon Musk defends Tesla’s $1.5 billion bitcoin bet as ‘adventurous enough’ for a S&P 500 company – and says it’s less dumb than holding cash

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Elon Musk.

  • Elon Musk defended Tesla’s bitcoin bet as “adventurous enough,” rather than also holding Dogecoin.
  • Musk was responding to Binance CEO Changpeng Zhao, who called out Tesla’s move in a Bloomberg interview.
  • Zhao said he was surprised that Musk is a Dogecoin advocate, given that it was created as a joke.
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Elon Musk defended Tesla’s $1.5 billion bitcoin bet after the CEO of major cryptocurrency exchange Binance called out the billionaire’s support for meme-based token Dogecoin. 

“Having some Bitcoin, which is simply a less dumb form of liquidity than cash, is adventurous enough for an S&P500 company,” Musk tweeted in response to a Bloomberg interview with Binance CEO Changpeng Zhao.

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Tesla made its biggest bitcoin endorsement yet by announcing not just its significant investment, but also that it plans to adopt the digital asset as a form of payment for its products. 

In the interview, Zhao said he was surprised that Musk is a Dogecoin advocate, given that it was created as a joke. Musk has fired off several tweets about the Shiba Inu-themed token, sparking a surge in its price. Last week, he said he bought some for his 9-month-old son.

“I strongly believe that he’s not really associated with Dogecoin in any way,” Zhao said of Musk, noting that Tesla’s bet was on bitcoin, and not on the “joke” asset. But Binance has added Dogecoin futures recently based on consumer demand. That’s because it’s gaining popularity for reasons nobody expected, Zhao said.

Zhao’s comments elicited a response from Musk, in which he explained the reason behind Tesla’s move.

“When fiat currency has negative real interest, only a fool wouldn’t look elsewhere,” Musk tweeted. “Bitcoin is almost as bs as fiat money. The key word is “almost”.”

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Other Wall Street names seem to be embracing bitcoin too, driving the token’s price higher to an all-time high above $52,000. As bitcoin surges to record highs, Zhao said Binance is seeing more than 300,000 new user registrations on a daily basis. The exchange last saw such remarkable levels during bitcoin’s 2017 boom, but volumes are even higher now.

“There’s a lot more activity now in this industry than three years ago,” said Zhao. “We are just at the beginning.”

Bitcoin’s rally extended on Friday as it rose 2% to trade around $52,740 as of 9:40 a.m GMT.

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Wedbush says Tesla’s bitcoin investment will spark further corporate adoption – and highlights 4 stocks already poised to gain from the crypto boom

Elon Musk
  • Tesla has paved the way for more corporations to head down the path to owning and accepting bitcoin, according to Wedbush. 
  • The firm says current bitcoin mania is not a “fad,” but the start of a new era of digital currency. 
  • PayPal, Square, Mastercard, and Visa could benefit from the crypto boom, Wedbush said.
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Tesla’s bitcoin bet could be a “game changer” for the digital currency and the broader adoption of blockchain technology over the coming years, according to Wedbush.

Given the still nascent and volatile nature around bitcoin, less than 5% of public companies will likely invest in bitcoin over the next twelve to eighteen months, but that could move “markedly higher” as more regulation and acceptance of the cryptocurrency takes hold in the future, a team of analysts said in a Monday note. 

Bitcoin reached a new high above $50,000 Tuesday morning, bringing its year-to-date gains to 74% in a sign of the growing acceptance of the digital currency.

According to Wedbush, the bitcoin mania is not simply a “fad,” but a sign of the broader digital currency and blockchain space growing.

Read more: GOLDMAN SACHS: These 40 heavily shorted stocks could be the next GameStop if retail traders target them – and the group has already nearly doubled over the past 3 months

“…We believe the trend of transactions, bitcoin investments, and blockchain driven initiatives could surge over the coming years as this bitcoin mania is not a fad in our opinion, but rather the start of a new age on the digital currency front,” said Wedbush. 

Also, Tesla’s announcement to begin accepting bitcoin as a form of payment could be a “paradigm changing move for the use of bitcoin from a transaction perspective.” 

This will bode well for payments companies PayPal and Square, said Wedbush. Both of those companies allow consumers to buy, hold, and sell cryptocurrencies which is resulting in higher frequency usage of their consumer-facing ecosystems. 

The crypto-boom could also be a “neutral to slight positive” for Visa and Mastercard, said Wedbush. Those two networks are gradually planning to accept central bank digital currencies and asset-backed currencies in payments transactions. Mastercard will start supporting certain cryptocurrencies directly on the network in 2021, which could open merchants up to new customers, the analysts added.

Also, Visa plans to launch a pilot crypto software program to help banks roll out bitcoin and cryptocurrency buying and trading services. 

Read more: UBS says bitcoin is a bubble and too volatile to diversify a portfolio, unlike gold – here’s why the bank says it could end up ‘worthless’

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