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Tesla stock TSLA chart resembles Bitcoin bubble in 2017, says analyst

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Julian Bridgen, the co-founder of the macroeconomic research firm MI2 Partners, believes Tesla stock (TSLA) shows signs of a bubble. He compared the stock Bitcoin (BTC) in 2017 when it hit $20,000 and dropped 58% in two months.

From the yearly high to the month’s bottom, TSLA price dropped by 33.74%. The stock has recovered in the past 48 hours, posting a considerable recovery of 12.46%.

Uncannily similar fractal between the Tesla stock price chart and Bitcoin price chart

Bridgen shared a chart of Tesla stock with a fractal of Bitcoin’s weekly chart from 2016 to 2019. He demonstrated some of the technical similarities between the two charts and explained:

“What defines a bubble? A great story is essential. In fact, the better the story the bigger the bubble. Then lots of liquidity and finally a classic bubble chart. For example, #bitcoin in 2017. In TSLA we have all three.”

The Tesla stock price chart with Bitcoin weekly chart. Source: Julian Bridgen

While the similarities between the Tesla and Bitcoin charts exist, there are several key differences. First, the chart compares the daily chart of Tesla stock to the weekly chart of BTC. Second, Tesla, as a public company, is fundamentally different from Bitcoin, a digital peer-to-peer network.

Moreover, Bitcoin is becoming increasingly seen as a store of value, often referred to as “digital gold.” Investors, both institutions and individuals, utilize BTC as a means to store and transfer value. For instance, MicroStrategy purchased $250 million worth of Bitcoin on Aug. 11, adopting it as the firm’s primary treasury asset.

In contrast, Tesla is the world’s most valuable carmaker whose stock price massively depends on the company’s performance.

But while there may be technical similarities between the Bitcoin and Tesla charts — especially since the correlation between BTC and stocks hit new highs this summer — fundamental factors likely affect the TSLA stock more than technicals. 

In the near term, analysts say Tesla has three main catalysts that could aid the stock’s recovery. Credit Suisse analyst Dan Levy outlined the three factors as S&P 500 inclusion, battery technology day and stock split.

On Sept. 22, Tesla is expected to host Battery Technology Day. Analysts expect Tesla to announce a long-lasting and better performance battery technology.

Variables such as the release of new technologies and an S&P 500 inclusion of the Tesla stock in the medium term could lead to the stock’s recovery.

At the same time, some analysts have predicted inclusion in the S&P 500 may see significant challenges solely due to the size of Tesla. Levy said on Sept. 2: 

“Of course, there is no guarantee Tesla will be included in the next add given challenges in adding a company of Tesla’s size.”

As such, an argument could be made that the Tesla stock’s pullback was expected, and was largely intensified by the Nasdaq’s recent slump. 

What do analysts say about the long-term outlook of BTC?

The chart of Bitcoin in late 2017 is often used to compare with other charts portraying vertical rallies.

Since the initial run-up to $20,000, BTC has mostly consolidated between $6,000 and $10,000 on higher time frames. Recently, it briefly surpassed the $12,000 resistance level and is now showing strength in the ability to remain above $10,000. 

Some investors, including Three Arrows Capital CEO Su Zhu, said he was surprised by the stability of BTC above $10,000, expressing optimism towards its macro price trend.





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Bitcoin derivatives data shows pro traders ignored today’s $41K pump

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Sometimes all Bitcoin (BTC) needs to pump 10% is a positive remark from someone like Elon Musk.

The Tesla CEO has been pointed to as the culprit for the recent downturn after the company’s May 12 announcement explaining that it would no longer accept Bitcoin payments due to environmental concerns. Musk followed up by saying that he was looking into other cryptocurrencies that required 99% less energy consumption. 

However, on June 13, the situation reversed as Musk reassured the public that Tesla did not sell any additional Bitcoin. The post also said that the electric-car producer would resume taking BTC payments as soon as its Bitcoin mining relied on a minimum of 50% clean energy.

In bear markets, top traders act with caution

While retail investors and algorithmic trading bots jump into action as soon as bullish or bearish signals and news flash, top traders tend to act more with more caution. Those who have been around the crypto markets long enough know that positive news might end up being ignored or severely downplayed in bear markets.

On the other hand, even potentially negative news seems to have little to no impact during bull runs. For example, on Sept. 26, 2020, Kucoin was hacked for $150 million. The following week, on Oct. 1, the United States Commodity Futures Trading Commission charged BitMEX for operating an unregistered trading platform and violating Anti-Money Laundering regulations.

Two weeks later, police reportedly questioned the founder of OKEx, forcing the exchange to suspend crypto withdrawals. Had this series of negative news happened while Bitcoin was flat or in a bearish phase, the price would have undoubtedly have stalled during a bear market.

Bitcoin price at Coinbase in USD, Sept. 2020. Source: TradingView

As shown above, Bitcoin barely had any negative impact in late September and October 2020. In fact, by the end of November 2020, Bitcoin was up 74% in two months. This is the main reason why top traders tend to ignore positive news during bear markets and vice-versa.

The 3-month futures premium is neutral

A futures contract seller will usually demand a price premium to regular spot exchanges. This situation is not exclusive to crypto markets and happens in every derivatives market because in addition to the exchange liquidity risk, the seller is postponing settlement and this results in a higher price.

The 3-month futures premium (basis rate) usually trades at a 5% to 15% annualized premium in healthy markets. When futures are trading below the regular spot exchange price, it signals a short-term bearish sentiment.

Huobi 3-month Bitcoin futures basis. Source: Skew

As shown above, the future basis has been below 11% since May 20 and flirting with bearish territory on multiple occasions as it tested 5%. The current level indicates a neutral position from top traders.

The options skew is no longer signaling fear

The 25% delta skew compares similar call (buy) and put (sell) options side-by-side. It will turn positive when the protective put options premium is higher than similar risk call options.

The opposite holds when market makers are bullish and this causes the 25% delta skew indicator to enter the negative range.

Deribit Bitcoin options 25% delta skew. Source: laevitas.ch

The above chart confirms that top traders, including arbitrage desks and market markers, are currently uncomfortable with Bitcoin price as the neutral-to-bearish put options premium is higher. However, the current 7% positive skew is far from the 20% exaggerated fear seen in late May.

Derivatives markets show no evidence of top traders getting excited about the recent $40,000 hike. On the bright side, there is room for leverage buyers to mount positions. Stronger upswings usually occur when investors are least expecting, and the current scenario seems to be a perfect example.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.