Elon Musk’s run as the richest man on earth has ended. Tesla’s months-long stratospheric stock rally seems to be coming to an end. After tumbling 6 percent, the largest single-day drop in six months, on Monday, the electric carmaker’s shares slid another 10 percent Tuesday morning as the sell-off worsened, erasing $30 billion from its founder Musk’s net worth on paper overnight.
Tesla’s epic losses were, on the surface, driven by a broad downturn of tech stocks (NASDAQ fell 2 percent on Monday and opened another 2 percent Tuesday morning). But a bigger force, according to Tesla analysts, is Bitcoin, whose dollar value recently hit an all-time high partly thanks to Musk’s public endorsement.
Earlier this month, Tesla disclosed in an SEC filing that it had bought $1.5 billion worth Bitcoin. The company also said it would start accepting Bitcoin as a payment method for its cars and services. The investment represented about 3 percent of Tesla’s cash on hand as of the end of 2020.
On Twitter, the Tesla CEO has been posting positive messages about Bitcoin and other cryptocurrencies. Last month, he briefly added the hashtag #Bitcoin to his Twitter bio, which subsequently sent Bitcoin price to jump 20 percent. Musk also frequently tweets about Dogecoin, a cryptocurrency inspired by an internet meme, driving its price up 800 percent this year so far.
The unusual hype is worrying central bank regulators. On Monday, U.S. Treasury Secretary Janet Yellen issued a warning about Bitcoin, calling it an “extremely inefficient way of conducting transactions.” Bitcoin price tumbled over 16 percent in the afternoon in tandem with Tesla shares.
“Musk is now tied to the bitcoin story in the eyes of the [Wall] Street and although Tesla made a billion paper profit in its first month owning the digital gold, it comes with added risk, as seen this week,” Wedbush’s star analyst Daniel Ives said in a note seen by CNBC on Tuesday. “With Tesla diving into the deep end of the pool on bitcoin, Musk runs the risk that this sideshow can overshadow the fundamental EV vision in the near term for investors.”
Tesla shares recovered slightly in mid-day trading Tuesday. At press time, Tesla stock is trading at $697, 10 percent below its record high this time last month. Musk’s net worth currently stands at $169 billion, trailing Amazon CEO Jeff Bezos as the second-richest person on Earth.