On September 9, Tesla’s share price rose 10.92% after dropping 21% earlier in the day. Coincidentally, the Bitcoin (BTC) price has also increased by roughly 5% in the past 24 hours.
In recent days, the correlation between Bitcoin and stocks has increased again. Deviation data shows that the monthly correlation between Bitcoin and the S&P 500 has increased from 18% to around 55%.
What is behind the Tesla dump and the bitcoin pump?
It is possible that the price of Tesla has decreased for two main reasons. First, many investors expected the stock to be listed in the latest release of the S&P 500 Index. Second, the US stock market has been fully corrected after the drop in technical stocks.
According to Ben Kallio, an analyst at Baird, Tesla shares fell particularly strongly because the price reversed expectations for a listing on the S&P 500. When the listing did not take place, it led to a massive sell-off. Kallio wrote:
We believe equities reflect large negative outflow expectations. We think stocks could come under pressure from a delay in listing the S&P 500, especially from investors who bought ahead of the announcement and expected stocks to be sold into negative funds. ”
But it is unclear if the S&P 500 is the most important catalyst for a short-term correction in stocks.
The Nasdaq has rebounded sharply after warnings of a widening gap between technical stocks and fundamentals. The index fell more than 4% on September 8 when the Financial Times and The Wall Street Journal reported that SoftBank was a “Nasdaq whale” that pushed markets higher with $ 4 billion in options.
Tesla shares tumbled as the US stock market began to decline. The correction in Tesla’s stake was so severe that CEO Elon Musk’s net worth decreased by $ 16.3 billion. Global market analyst Holger Sischitz said:
Elon Musk’s net worth dipped $ 16.3 billion out of ten, as Tesla shares fell 21% in the biggest disappearance of the day in the history of the BBG Billionaires Index. Zhong Shanshan added $ 30 billion to his fortune after the bottled water company he founded rebounded after its listing. ”
Bitcoin has likely slumped and rebounded alongside Tesla stocks due to the increasing correlation between BTC and the S&P 500 in recent months.
According to Skew, the correlation between Bitcoin and US stocks is now much higher than it was before the pandemic.
Correlation has risen dramatically over the past 24 hours, after a simultaneous correction and recovery in bitcoin and tech stocks.
What does correlation mean for the Bitcoin price?
The correlation and simultaneous rise in Tesla and BTC stocks do not indicate a clear direction for Bitcoin. But it does show that the entire financial market is still fragile five months into the crash caused by the epidemic.
It could also prove that investors can view Bitcoin in the same field of technical stocks and other risk factors, especially during a sensitive period.