Market analysts argue that Tesla’s exposure to Bitcoin (BTC) may be the reason for its strong decorrelation with Big Tech (the tech giants) in recent weeks. As of Wednesday, July 14, la 20-day correlation between the company’s price and the Nasdaq index 100 it fell from 0.83 on June 17 to 0.14.
While Tesla has lost almost 4% this month, the Nasdaq 100 is up more than 2%. There is also a weakened correlation between Tesla’s shares and the NYSE FANG+ index, such as Reported BNN Bloomberg. Amy Wu Silverman, derivatives strategist at RBC Capital Markets, told reporters:
“Tesla is highly correlated with megacap technology […], this relationship has really been decoupled in the short term. When I ask, the feedback I get is that this is related to their exposure to Bitcoin and how it will have to be accounted for when they report profits.”
The electric vehicle maker’s earnings report is due july 26. Tesla’s hectic and controversial relationship with Bitcoin dominated the headlines, and possibly catalyzed a run-up in the cryptocurrency market, in February this year, when the company revealed a strategic acquisition of $1.5 billion in Bitcoin valued at 7.7% of its gross cash position at that time. It soon announced that it would begin accepting payments in BTC for its vehicles, indicating plans to hold, rather than sell, Bitcoin.
The company sold a portion of its Bitcoin in the first quarter of 2021, generating net profits of $272 million, although Musk clarified that he himself had not sold any of his own stakes in BTC. By May, the close bond between Tesla and the veteran cryptocurrency had begun to crumble, and Musk announced that Tesla would withdraw from accepting BTC payments due to environmental concerns on energy-intensive Bitcoin mining.
Time will tell if Tesla’s weakened short-term correlation with Big Tech stocks it will become an established dynamic. In the cryptocurrency space, many have focused more on the large impact Musk himself has had on the cryptocurrency market as a whole, the most surprising thing when it comes to Bitcoin and the cryptocurrency of the Meme Dogecoin (DOGE).