Tesla’s share price rose 10.92% on September 9, after falling 21% earlier in the day. The price of Bitcoin (BTC) has also risen by about 5% in the last 24 hours.
In recent days, the correlation between bitcoin and stocks has increased again. Skewed data show that the monthly correlation between bitcoin and the S&P 500 has increased from 18% to about 55%.
What is behind the Tesla dump and bitcoin pump?
Tesla’s price may have fallen for two main reasons. First, many investors expected the stock to be included in the latest S&P 500 edition. Second, the US stock market completely corrected after the fall in technology stocks.
According to Ben Kalio, an analyst at Baird, Tesla shares fell sharply because the price changed the expectation of listing on the S&P 500. When it was not listed, it caused a massive sale. Callio wrote:
We believe the shares reflected expectations of significant negative inflows. We believe that equities may come under pressure after the S&P 500 listing was postponed, especially from investors who bought equities prior to the announcement and look forward to selling negative funds.
However, it is unclear whether the S&P 500 is the most important catalyst for short-term correction in equities.
Nasdaq has been heavily revised following warnings of a growing gap between technical stocks and fundamentals. The index fell more than 4% on September 8, when FT and WSJ reported that SoftBank was the “whale on Nasdaq” that lifted the markets with an option of 4 billion dollars.
As the US stock market began to decline, Tesla shares fell at the same time. Tesla’s stock correction was so drastic that it crushed CEO Elon Musk’s net worth by $ 16.3 billion. Welt Holger Zschaepitz, market analyst, said:
Elon Musk’s net worth fell $ 16.3 billion on Tuesday as Tesla shares plunged 21%, the largest one-day survey in BBG Billionaires Index history. Zhong Shanshan added more than $ 30 billion to his fortune after shares in the bottled water company he founded rose. After the IPO. ”
Bitcoin is likely to fall and return with Tesla shares due to the increased correlation between BTC and the S&P 500 in recent months.
According to Skew data, the correlation between bitcoin and US stocks has been much higher since the pre-pandemic era.
Over the past 24 hours, following a simultaneous correction and recovery in bitcoin and tech stocks, the correlation has increased.
What does the correlation mean for bitcoin price?
The correlation and simultaneous increase in Tesla and BTC shares does not indicate a clear direction for Bitcoin. But it shows that the entire financial market is still fragile five months after the crash caused by the epidemic.
It can also show that investors can see Bitcoin in the same area as technical stocks and other risky assets, especially in times of weakness.