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Bitcoin plunge drags Tesla down

02/23/2021 | 11:42am EST

A big drop in the price of bitcoin Tuesday is fueling fears a recent buying frenzy had pushed the value of the notoriously volatile asset far beyond where it should be.

The world's biggest cryptocurrency was in the throes of its biggest daily plunge in a month, sparking the liquidation of leveraged bets and a sell-off across the cryptocurrency world.

Tesla was also caught up in the whirlwind. Shares of the electric car maker took a hit Tuesday, as the plummet in bitcoin takes the shine off Tesla's recent $1.5 billion bitcoin investment.

With that gamble now worth much less, the stock is under pressure - erasing all of its gains for the year - shaving more than $110 billion of market value and some $20 billion from CEO Elon Musk's net worth.

Nerves have gotten the best of bitcoin buyers since it hit a record high Sunday of more than $58,000. Since then it has lost over 20 percent of its value, trading one point at about $46,000 on Tuesday.

Rising government bond yields have recently knocked the wind out of riskier assets on Wall Street and bitcoin is one of the riskiest of them all.

The stampede away from bitcoin only intensified by investors dumping purchases made with borrowed money.

Adding to the pressure: comments from U.S. Treasury Secretary Janet Yellen, who on Monday said the digital currency was extremely inefficient at conducting transactions and was a highly speculative asset. Even with Tuesday's plunge, bitcoin is still up 60 percent so far this year.

© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
BITCOIN - UNITED STATES DOLLAR -1.94% 46181.16 Real-time Quote.63.01%
TESLA, INC. -0.99% 675.5 Delayed Quote.-4.28%
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