Few hours after Elon Musk CEO of Tesla disrupted the Bitcoin (BTC) rally with the “seem high” tweet, Tesla (NASDAQ: TSLA) stock plunged 15% to $698 per share. The stock downturn followed Bitcoin’s 16% dip when it traded as low as $45,389. Daniel Ives, an analyst at Wedbush said that Tesla’s share price is now tied to Bitcoin.
In an email sent to CNBC on Tuesday, Ives said “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.”
“With Tesla diving into the deep end of the pool on bitcoin, Musk runs the risk that this sideshow can overshadow the fundamental EV (electric vehicle) vision in the near term for investors. However, it’s a smart move at the right time for Tesla.” He added.
On Sunday, Ives estimated that Tesla profited over $1 billion from its $1.5 billion investment in the digital token. However, there is no information on whether or not the electric car manufacturer had sold its Bitcoin holdings.
“On the downside, it’s playing with firecrackers, and risks and volatility are added to the Tesla story,” Ives added.
Wedbush is still bullish on Tesla’s stock
However, shares of Tesla’s price plunge aren’t only tied to Bitcoin. On Monday, the company’s shares closed down 8.55% after investors made a hard bet on cyclical stocks. The dip is Tesla’s biggest loss when it closed down 10.34% on September 23, 2020.
Additionally, Ives isn’t the only person to warn of Bitcoin’s highly volatile market. On Monday, U.S. Treasury Secretary Janet Yellen warned of the digital currency and stated that investors can lose lots of money by investing in Bitcoin, Yellen said that “Bitcoin is an extremely inefficient way of conducting transactions”.
Furthermore, Bill Gates; billionaire and co-founder of Microsoft said that Bitcoin is one innovation that the world can live without. Gates argued that the decentralized feature of digital currency makes it worthless.
However, Ives’ comments on Bitcoin don’t seem to stop his company Wedbush from staying bullish on Tesla. He said: “We believe Tesla will hit a one trillion market cap over the coming months through its EV growth and not through bitcoin,”
“We believe EV adoption is skyrocketing globally, led by China, and this speaks to why Tesla is so well-positioned to capitalize on this $5 trillion market over the next decade. However, bitcoin for now is overshadowing the broader Tesla growth story for 2021 although we believe this will soon pass.” He added