Bitcoin does what it knows best – it keeps pressuring the highs after it found support in the $46k area. Once again, Bitcoin enthusiasts started projecting new highs as the market climbed back from the lows and currently trades above $54k, just shy from a new all-time high.
The pandemic brought a new class of investors – the retail investors. Surely enough, retail traders were part of the financial world for a long time. However, it is only recently that the flows pouring out of the retail sector into financial assets are so big that they are worth considering. For example, retail trading on the stock market accounts nowadays for as much volume as mutual and hedge funds combined.
Because most retail traders are fans of cryptocurrencies, the large inflows from the retail community spilled over the major crypto coins. Bitcoin is just one of them, but similar price action was seen on Ethereum and other altcoins.
The frenzy explains one of the most interesting charts lately. On the one hand, gold, the traditional commodity that protects an investing account from inflation, keeps making new lows. It broke below $1,700 yesterday, on renewed selling pressure.
Tesla Lost Over 30% Since Announcing $1.5 Billion Bitcoin Investment
When a market declines by more than 20% from the recent high, it is said that it entered bearish territory. Tesla, after announcing at the start of February a $1.5 billion investment in Bitcoin, declined more than 20%. Is it already in a bearish market? Technically, it is, but many traders view Tesla as already stretched after it rose over 800% in the last couple of years. As such, a correction is welcomed and may be just what Tesla bulls needed to add at lower levels.
From the moment that Tesla announced the investment in Bitcoin, its shares declined. So did the price of Bitcoin, which dropped from as high as $58k to $46k. At one point during the slide, the two markets were extremely correlated, with little or no difference between the way Tesla’s stock traded and the way Bitcoin did.
However, the correlation broke recently as Bitcoin recovered most of the lost ground. Should Bitcoin make a new all-time high and continue its bullish trend, the move higher should bring some support to Tesla’s share price. As a big part of the new fiscal stimulus is expected to find its way back into the stock market (and cryptocurrency market), one should not be surprised to see another run at the highs from both Tesla and Bitcoin.