Tesla Rides the 'Bitcoin Risk'... Musk Also Loses Top Richest Spot (Summary)

Published 24 Feb.2021 15:42(KST)

Intraday Drop to $600 Range... 30%↓ from Last Month's High
CNN "Bitcoin Price Decline Affects Tesla Stock"
Musk's Wealth Evaporates by 17 Trillion Won... Loses No.1 Spot in Global Rich List

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] The stock price of Tesla, the U.S. electric vehicle company led by Elon Musk, fell to the $600 range during trading hours. As a result, Musk's wealth reportedly decreased by about 17 trillion won since the weekend. This is interpreted as being influenced by the recent decline in Bitcoin prices, which also affected Tesla's stock price due to its large Bitcoin purchases.

According to CNN on the 23rd (local time), Tesla's stock price dropped as much as 13% during the day to $619. This marks a roughly 30% decline from the $883 recorded on the 26th of last month. Although it recovered to a stable range in the afternoon, it closed the day at around $700, down 2% from the previous day. The market capitalization also recorded $670 billion (744 trillion won), erasing 200 trillion won compared to last month's peak.

On the 8th, Tesla invested $1.5 billion (1.7 trillion won) in the cryptocurrency Bitcoin, sparking a Bitcoin rally. Subsequently, Bitcoin prices surpassed $50,000 for the first time on the 16th and reached a high of $58,000. This represents an approximately 95% surge compared to the $30,000 recorded at the beginning of the year.

However, after Musk tweeted on the 20th that "Bitcoin prices are too high," Bitcoin prices continued to decline. CNN reported, "As Bitcoin prices plummeted, Tesla's stock price also slid." The current price has dropped to $48,000, down 11% from the previous day.

Additionally, CNN added, "Tesla lost a significant portion of the stock price gains associated with its inclusion in the Standard & Poor's (S&P) 500, a major U.S. stock index, due to the sharp stock price drop."

With the continued decline in Bitcoin prices, Tesla closed the previous day at $714.50, down 8.55%.

Earlier, U.S. Treasury Secretary Janet Yellen warned in an interview with CNBC on the 22nd that "Bitcoin is a very inefficient means of transaction and a speculative asset," cautioning about the rapid price surge. The Wall Street Journal (WSJ) also reported, "Bitcoin is a highly volatile asset, so the potential for losses is very high."

There are predictions that Bitcoin's volatility will negatively impact Tesla as well. Daniel Ives, an analyst at Wedbush Securities, analyzed, "Bitcoin's instability is directly affecting Tesla's stock price." He added, "Bitcoin's price has come to determine Tesla's stock price, and Bitcoin along with Musk's tweets about it are acting as risks to Tesla's stock."

Moreover, CNN reported that Tesla's recent price cuts on its affordable models were interpreted as a decrease in demand for Tesla electric vehicles, and that the shortage of electric vehicle batteries and the entry of competitors like Apple Car into the electric vehicle market also influenced the stock price decline.

As Tesla's stock price fell, Musk's wealth reportedly decreased by more than $1.5 billion (17 trillion won) since last weekend. Currently, Musk is the largest shareholder with a 20% stake in Tesla. Bloomberg reported, "Musk's wealth dropped by more than $1.5 billion to $183 billion (203 trillion won)," and "he lost the world's richest person ranking to Jeff Bezos, CEO of Amazon, who owns $186 billion (206 trillion won)."

Previously, Tesla's stock price surged 743% last year, achieving the highest market capitalization among all automobile manufacturers. When Tesla was officially included in the S&P 500 on December 21 last year, its stock price was $649.86.