TESLA, ELON MUSK, & CRYPTOCURRENCY
The Tesla Implosion is Imminent and Their Bitcoin Purchase is the Catalyst
The same market forces that drove Tesla’s share price up will accelerate its downfall
Stocks do not always go up. Once in while however, some stocks appear to be moving in one direction only.
But the higher you climb, the harder you fall. Especially if the underlying business is poor. Here’s where Tesla enters the scene.
Tesla is a legit business. For years they have benefitted from a first-mover position in the market for electric vehicles.
A competitive advantage in battery technology, government subsidies, and a drooling cult-following willing to buy shares and options contracts at almost any price or risk/reward ratio. Willing also to be diluted at insane valuations.
A generous valuation puts the fundamental value of a Tesla share around $150
There’s no denying the grass has appeared green at the Tesla front yard.
But things are about to change. Tesla’s market capitalization is detached from reality, even taking the most delusional view of the future.
Tesla has grown exponentially for a period, but growth is decelerating. It might stall completely not too far out in the future.
Despite that, the Tesla share price continued its rise into the stratosphere during 2020. A generous valuation, assuming 1) exponential growth to continues (which it will not) and 2) Tesla to be a market leader in the future consolidated electric vehicle space, puts the fundamental value of a Tesla share around $150.
In stark contrast to the current share price of around $670 (as of February 23), down from its ~$883 ATH in late January.
Thanks also to Tesla loading their balance sheet with Bitcoin, the markets have strong indications the bubble is about to burst. And due to the functioning of the market, a small change in sentiment can hammer the stock price toward dual digits.
The mechanisms at play include gamma/delta squeezes, driven by movements in the…
