On September 9, Tesla shares rose 10.92% after a 21% drop earlier in the day. Random, Bitcoin (BTC) price also rose almost 5% in the past 24 hours.
XBT / USD 4 hour chart. Source: TradingView.com
In the past few days, the correlation between Bitcoin and stocks has increased again. Skew data shows that the correlation between Bitcoin and the 1-month SP 500 has increased from 18% to around 55%.
What’s behind the Tesla dump and the pomp of Bitcoin?
Tesla’s price has likely dropped for two main reasons. First, Many investors expected stocks to be included in the latest release of the SP 500 Index. Second, the entire US stock market corrected after the tech stocks slump..
According to Ben Kalio, an analyst at Baird, Tesla shares fell particularly sharply as their price reflected expectations for inclusion in the SP 500. If the listing didn’t go ahead, it caused a sell-off. Kalio wrote:
“We believe the stock reflected expectations for significant passive inflows. We believe that following the delay in listing on the SP 500, the stock could come under pressure, particularly from investors who bought prior to the announcement and are waiting for the opportunity to sell for passive funds. “
But It’s unclear if the SP 500’s nudge was the main catalyst for the short-term correction Action.
The Nasdaq corrected sharply after warnings of a widening gap between technology stocks and fundamentals emerged.. The index fell more than 4% on September 8th when the FT and WSJ reported that SoftBank was the “whale of Nasdaq” propelling the markets with a $ 4 billion option bet.
As the US stock market began to slide, Tesla shares tumbled. The correction in Tesla shares was so severe that CEO Elon Musk’s net worth rose by $ 16.3 billion.. World market analyst Holger Zschaepitz said::
Elon Musk’s net worth fell to $ 16.3 billion on Tuesday, while Tesla stock fell 21%. This was the largest one-day decline in the history of the BBG Billionaires Index. Zhong Shanshan added more than $ 30 billion to his net worth after stakes in the mineral water company he founded rose sharply following an IPO. “
Bitcoin is likely to have fallen and rebounded along with Tesla stocks in recent months due to the increasing correlation between BTC and the SP 500.
According to Skew The correlation between Bitcoin and US stocks is much higher today than it was before the pandemic.
In the last 24 hours after the correction and simultaneous restoration of the shares of Bitcoin and Technology, the correlation increased significantly.
The correlation between Bitcoin and the SP 500. Source: Skew
What does the correlation mean for the price of Bitcoin?
The correlation and simultaneous rally of Tesla and BTC stocks do not suggest a clear direction for Bitcoin. However, it turns out that the entire financial market remains fragile five months after the crash caused by the pandemic.
It could show that too Investors can view Bitcoin in the same way as technology stocks and other risky assets, especially at a vulnerable time.