Bitcoin crash: Tesla has “diamond in hand”

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Tencent technology news on May 20, as governments around the world implement more and more strict supervision on cryptocurrency, the price of bitcoin plummeted by 30% in the U.S. local time on Wednesday. As a result, the value of bitcoin held by Tesla, the electric car manufacturer, has shrunk by nearly half to about $1.26 billion, which is close to the cost of the company’s initial investment.
However, Elon Musk, Tesla’s chief executive, tweeted the symbol “Diamond hand” to 55.3 million fans, suggesting that the company would not sell bitcoin“ “Diamond hand” is a symbol often used on reddit to indicate that it will continue to hold certain stocks or other assets unswervingly. On Wednesday afternoon, Tesla shares fell 3%, more than the U.S. market index.
Musk has made a lot of comments about cryptocurrency, which has led to dramatic fluctuations in the value of bitcoin and dogcoin in the past few weeks. On February 8, Tesla disclosed its $1.5 billion bitcoin investment. By selling 10% of its bitcoin holdings, Tesla made a profit in the first quarter. But the investment also forced shareholders to face the turbulent cryptocurrency market directly.
“As car sales in China slow down, Tesla may need to sell cryptocurrency again to make a profit,” said Samuel Indyk, senior analyst at uk.investing.com. However, with the price of bitcoin down nearly 50% from its all-time high, Tesla’s chances of profiting from cryptocurrency sales seem increasingly slim. ”
At the end of the first quarter, the value of Tesla’s bitcoin holdings was about $2.48 billion, which is now worth about $1.26 billion, based on a 49% cumulative decline in recent prices. This will be slightly lower than the $1.3 billion position value given by Tesla, which is the actual investment cost paid by Tesla.
“If the price of bitcoin falls below the book value, it must be included in the write down, which could have an adverse impact on our operating performance at any time,” Tesla said. However, the write down will only be recorded after bitcoin is sold. ”
Bitcoin fell to about $30000 on Wednesday local time, down from the average price of $32734 in January. “The rapid fall in bitcoin prices shows how risky this automaker is to invest in digital assets,” said David Kimberley, an analyst at freetrade, an investment app
Tesla briefly allowed customers to use bitcoin to buy cars, but later withdrew the option for fear of environmental impact, leading to a sharp drop in the price of bitcoin. Taylor Ogan, chief executive of snow bull capital, said: “the price of bitcoin is changing all the time, which is not an optimistic sign compared with bitcoin or Tesla.”
Shortly after 3 p.m. on Wednesday, Tesla’s share price rebounded to $557.05. In previous intraday trading, the stock had fallen to $546.98, the lowest level since March 5.
Tesla’s shares have fallen about 20 per cent this year, while the S & P 500 has risen about 8 per cent. In 2020, Tesla’s share price is up 743%, while the standard & Poor’s index is up 16% over the same period.
Three reasons lead to bitcoin price crash
Compared with the sharp rise that began in the second half of last year, the recent decline in cryptocurrency prices is a reversal. Since September last year, bitcoin prices have risen by more than 200%, driven in part by hedge funds, banks and other companies willing to accept cryptocurrencies.
In the long run, Mike Novogratz, who looks like a special currency, said: “more and more people have cryptocurrency, which has penetrated into every corner of our society. There are many positive factors driving the price of cryptocurrency to soar, but now we have a “liquidation event.”
Institutional backwardness
Part of the reason for bitcoin’s collapse seems to be that the theory that cryptocurrency will be more widely accepted has been questioned. Earlier this year, musk announced that he would buy more than $1 billion of bitcoin. Several payment companies have announced that they are upgrading their capabilities to support more cryptocurrency transactions, and Wall Street banks have begun to develop cryptocurrency trading teams for customers. Coinbase, the cryptocurrency trading platform, went public in mid April through direct listing.
However, musk announced last week that Tesla would no longer accept bitcoin as a way to pay for a car, citing more environmental concerns. Coinbase’s share price soared above $400 shortly after its first trading on April 14, but quickly reversed those gains, falling nearly $220 on Wednesday morning. The day of coinbase’s direct listing was also the day bitcoin recently hit an all-time high.
In addition, according to a new report from JPMorgan, institutional investors seem to be switching from bitcoin to gold under futures contracts. Bitcoin is often touted as a potential substitute for traditional precious metals as a means of storing value.
Hedging?
The collapse in bitcoin prices is not an isolated phenomenon in the cryptocurrency sector. These signs indicate that investors are withdrawing from more speculative transactions. Novel coronavirus pneumonia and growth stocks have also been underperforming in recent weeks, many of which have performed far better than the new market during the new crown pneumonia outbreak.
Ark innovation, a high growth equity fund led by star fund manager Cathie wood, is down more than 30% from its February high. As of Wednesday morning, the technology-based Nasdaq composite index had fallen 6.9% from its latest closing high on April 26, while the small cap Russell 2000 index had fallen 5.6% over the same period.
The falls also coincide with a delay in the tax deadline, which could create selling pressure as investors look for cash to repay their capital gains tax debt.
Regulatory concerns

As bitcoin and related assets occupy an increasing share of the financial market, they are also subject to increasingly stringent scrutiny by regulators around the world.
“We believe that the government’s heavy scrutiny of cryptocurrencies could trigger another ‘cryptocurrency winter’ and lead to a decline in trading activity,” said Bernstein analyst harshita Rawat. Many developing countries are likely to impose stricter regulation on cryptocurrency, which may be seen as a threat to their legal tender and monetary system. ”
In the US, Gary Gensler, the new chairman of the US Securities and Exchange Commission, said earlier this month that he believed regulators should remain “technology neutral,” but the cryptocurrency market needed more consumer protection.
At first, the rise of dogcoin was purely a joke. Later, with the help of musk, it gained more popularity, which may also damage the overall credibility of the cryptocurrency market. Some trends in smaller, less well-known cryptocurrencies suggest that the bull market in cryptocurrencies is related to an increase in speculative trading in stocks rather than an increase in institutional interest.
Interest in other less well-known cryptocurrencies has also increased in recent weeks. Barstool sports founder Dave Portnoy announced earlier that he had purchased $40000 in cryptocurrency safemoon, which he called “s-coin.”( Tencent technology reviser / Jinlu)