According to analysts, Elon Musk’s electric car company Tesla has directly tied its share price to the value of Bitcoin following the company’s major investment in the cryptocurrency. One analyst told CNBC: “Musk runs the risk that this side show can overshadow the fundamental EV (electric vehicle) vision in the near term for investors.”
CNBC reports that according to Wedbush analyst Daniel Ives, Elon Musk’s electric car maker Tesla has directly linked its share price to the value of Bitcoin following the company’s recent $1.5 billion investment into the cryptocurrency.
Ives told CNBC via email: “Musk is now tied to the bitcoin story in the eyes of the Street and although Tesla made a billion paper profit in its first month owning the digital gold, it comes with added risk, as seen this week.”
Ives added: “With Tesla diving into the deep end of the pool on bitcoin, Musk runs the risk that this side show can overshadow the fundamental EV (electric vehicle) vision in the near term for investors.”
However, Ives still believes that Bitcoin is a “smart move at the right time for Tesla.” On Monday, Ives estimated that Tesla has already made $1 billion from its investment into the cryptocurrency.
“On the downside it’s playing with firecrackers and risks and volatility are added to the Tesla story,” Ives said.
Both Tesla and Bitcoin have seen major losses in the past week. Tesla shares dropped in premarket trading on Tuesday, down over 7 percent a day after the stock’s biggest loss in months.
Tesla shares closed down 8.55 percent on Monday. This marked Tesla’s biggest drop since September 23, 2020, when it closed down 10.34 percent.
Bitcoin’s price took a hit on Tuesday following a warning from U.S. Treasury Secretary Janet Yellen about cryptocurrency. Yellen called Bitcoin an “extremely inefficient way of conducting transactions” and warned that it could be used for illicit activity.
Bitcoin prices dropped by 16 percent in the last 24 hours, dropping below $50,000 to trade as low as $45,389 this morning.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship. Follow him on Twitter @LucasNolan or contact via secure email at the address email@example.com