Tesla Inc. (NASDAQ: TSLA) shares plunged by more than 8% when the market closed on Thursday. The news that most significantly impacted this plunge is due to the fact that Tesla is halting the production line of Model 3 in Fremont, a Californian-based, factory. This is only but recent development in a pattern of loss for Tesla (TSLA) stock since January.
Tesla: a Game of Thrones, Tweets, and Bitcoin
In the last quarter of 2020, S&P Dow Jones Indices announced the incorporation of Tesla, which made it the biggest EV-automaker to join the stock-market benchmark. This caused a surge of the market share of 70% in the Tesla stock and increased the value by more than $650 billion. Elon Musk was given the throne of the richest guy early in January of 2021. On February 8th, Tesla announced that it has invested $1.5 billion in Bitcoin which shot the crypto-currency up to an all-time high of $58,000 per unit.
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However, recently there has been a plunge in Bitcoin prices, the cause of which has been associated with US market contractions. The plunge is also associated with the tweet posted by Elon Musk where he said that the “BTC & ETC do seem high” referring to the prices of Bitcoin and Ethereum. The decision of why Elon Musk would tweet about prices of cryptocurrency being high is dubious provided the fact that his company had invested $1.5 billion into Bitcoin and now the prices of Bitcoin are falling.
The fall of Bitcoin price on Tuesday by 11% and along with Tesla’s recent decision to halt the orders for its cheapest version of Model Y SUV has made the investors divest their interest. The Tesla stock plunged, taking with it the title of Elon Musk as the richest person and dropping his net-worth by $15 billion in a single day (on Monday). Tesla’s market-cap before the Bitcoin news development was $844 billion and afterward, when the news was public, Tesla racked up losses by 25% in a week. This has led to a $215 billion dollar loss.
Halt in the production line of Model 3 in Fremont
The recent halt in Fremont for the production line of Model 3 is majorly due to the global shortage of chips in the auto industry. These chips are basically semiconductors and electrical components that are now increasingly used by auto-makers for their cars. Although Tesla has not specified the reason for the halt but it has told its employees that the halt will take place from the 22nd of February to the 7th of March. More than just the shortage, the Bloomberg news speculates that the halt may also be due to the snowstorms that are disrupting the supply chain.
Bitcoin investment brings volatility to the Tesla shares in the EV market
There was a sharp sell-off in the overall-market on Thursday that reduced the S&P index by 2.5% and the NASDAQ composite by 3.5%. This has likely affected the Tesla Stock on Thursday as well. Tesla currently has an 18% share in the global EV market and competition is tightening up. The major cause of concern as sourced by the Wedbush analyst, Daniel Ives is that the recent Bitcoin investment endeavor by Elon Musk can adversely overshadow the much attention Tesla needs to put on its EV growth in this golden era of EV. There is too much volatility in the relatively small market of cryptocurrency and having that mixed into the EV market may overcomplicate the investors’ risk-making decision for Tesla stock.