When the news broke that enigmatic tech guru Elon Musk had finally made a substantial dive into Bitcoin the market redacted strongly and all the talk was around this watershed moment for adoption of Bitcoin.
The cryptocurrency has been courting mainstream adoption for nearly five years, and in the recent few years it has gained some real traction with the Tesla purchase of $1.5 billion marking a significant milestone in this journey.
However, there are some analysts who believe the hype and excitement around Tesla entering the Bitcoin market could actually cause issues and may not have the snowball effect that many would have been hoping for.
Elong Musk, the CEO of Tesla, has been talking up cryptocurrency, and notably meme-coin Doge, at length in his social media platforms. It is thus not too surprising to see that Tesla had moved nearly 8% of its reserves into Bitcoin, which sent the price of the cryptocurrency to all-time highs, up more than 16% this week. Interestingly,Tesla’s shares are down nearly 6%.
Shareholders voiced concern that the investment by Tesla could fuel more moves in the company’s shares.
“It will add volatility to the stock due to exposure to bitcoin,” said King Lip, chief strategist at Baker Avenue Wealth Management, whose firm has owned Tesla shares since 2015. “This is better for bitcoin than it is for Tesla.”
Gary Black, former chief executive of Aegon Asset Management and now a private investor who has been bullish on Tesla since 2019, on Monday announced here on Twitter that he had sold his Tesla shares. He cited the absence of a 2021 delivery target and the company’s riskier capital allocation strategy, among other reasons.
Black also tweeted here on Monday: “$TSLA has always been higher risk, but investing $1.5B in #Bitcoin makes it more risky.” He did not respond to a request for comment.
“Elon Musk has exposed Tesla to immense mark-to-market risk,” Peter Garnry, head of equity strategy at Saxo Bank, wrote.