With the recent rebound in US Treasury yields and dollar value, Tesla and Bitcoin are drawing attention over whether or not the liquidity market will continue. As Tesla, a symbol of growth, and Bitcoin, which bets on the dollar decline, are at the forefront of the liquidity rally, the risk of liquidity reduction is expected to be reflected first.
According to the data of CoinMarketCap, a cryptocurrency information company on the 19th, bitcoin rebounded 2% from the previous day to $36,630 per coin on the 18th (local time). Its market capitalization is 6815 billion dollars (752 trillion won). Bitcoin price in Korea also recovered 40 million won.
As of the 15th, Tesla’s market cap was 7831 billion dollars (865 trillion won), ranking fifth in the US stock market after Alphabet (Google parent company). Tesla’s share price surged 743% last year, and 17.1% this year. Bitcoin price rose 300% last year and 26.3% this year.
Zero interest rate behind the Tesla run?
Many of the Wall Street analysts who had been criticizing Tesla for being on the verge of bankruptcy had to submit reports admitting that the analysis was wrong. The target price has also been raised. Some find the surge in Tesla’s stock price in the buying craze of individual investors. Domestic investors’ overseas stock purchases also focused on Tesla. According to data from the Korea Securities Depository, the amount of Tesla stock held by domestic investors as of the 15th was $10,149.57 million (11,1584 billion won), more than three times that of Apple, the second place.
Optimists argue that the zero interest rate justifies the high market value of a growing company like Tesla. Under the zero interest rate, since the discount rate for converting future profits to present value is close to zero, it is a logic that the valuation of a company may increase rapidly. If so, if the interest rate rises, the discount rate will increase, which could hurt Tesla’s share price the most.
The 10-year US Treasury bond rate has risen from 0.51% in August of last year to 1.08% now. Compound Advisor, a US investment company, diagnosed, “The Tesla stock price depends on whether the company will continue to grow higher in the future and investors will be willing to buy even at high prices.”
On the 8th, when Tesla’s share price hit a high, Michael Bury, CEO of Science Asset, a famous US hedge fund investor, said, “My last big short (short selling) is getting bigger and bigger.” It means that Tesla’s stock price bubble went out. Wells Fargo of the US bank also argued in’Ten Prophecies of 2021′ that “Tesla can take the train of America Online (AOL), an Internet company that has disappeared into history.”
Bitcoin on the dollar?
Bitcoin advocates are convinced that the decline in the value of key currencies, such as the dollar, due to money loosening in major countries, along with gold, will fuel the price of Bitcoin. “It’s a small but strong insured against the devaluation of the world’s major currencies,” said Ruper, a UK asset manager who invested 2.5% of its assets in Bitcoin. Recently, the dollar has stopped falling and attempting to rebound due to the preference for safe assets following the re-proliferation of Corona 19. As a result, the international gold price, which aimed to recapture $2,000 per ounce, was pushed back to the $1,820 range.
Some argue that this bitcoin rally is different from the past in that it is led by institutional investors, not individuals. About this British weekly <이코노미스트>“Large pension funds tend to avoid assets like bitcoin that don’t generate future cash flow,” he said.
If the dollar turns to strong, global liquidity shrinks and has a negative impact on both Bitcoin and emerging markets. Heungkuk Securities researcher Song Jae-kyung advised, “You should avoid just waiting in line at the end of the buying line with the thought that it’s different this time.”
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