As tech stocks heat up, a potential Tesla bubble is giving investors nightmares. Founded by Elon Musk, both Tesla and SpaceX hold immense potential when it comes to changing the world. However, the stock market has its way of interpreting financial jargon to define any stock’s value.
The current valuation and volatility in Elon Musk’s tech giant is a fast-approaching bubble-like behavior – very much like the Bitcoin 2017 saga. And every crypto enthusiast knows how that story ended. Analyst Julian Bridgen says that the Tesla bubble is mimicking Bitcoin’s 2017 patterns and investors will soon learn their lesson the hard way.
Investors are ignoring the impending Tesla bubble
The year 2017 saw Bitcoin rise from $1,000 to touch $20,000. It was a bubble in the making but crypto investors piled on money relentlessly. Come February 2018 and the Bitcoin bubble popped big time. By the end of 2018, Bitcoin price touched $3,500 wiping out a massive portion of investor’s money and leaving many devastated.
Now, it seems that the Tesla bubble will also follow the same route Bitcoin took in 2018. The warning signs are often clouded by many positive developments. For example, Tesla has the rare distinction of achieving growth during a pandemic when notable firms experienced severe contraction. The company announced many new developments despite an impending economic slowdown.
Tesla shares exploded in a short span of time. Currently, Tesla stocks are trading around $420 after it touched a high of $450 two weeks ago. Technically, weekly charts are deep into overbought territory. It is trading at 165 times forward earnings – significantly more than conventional benchmarks.
Elon Musk’s on-off relation with crypto
Elon Musk holds mixed views about cryptocurrencies, especially Bitcoin. Despite having no links to BTC or crypto in general, he does share his thoughts on the topic often through various social platforms. For example, Elon has repeatedly commented on Dogecoin, but passed an opportunity to serve Dogecoin’s chief executive officer.
As of now, it is hard to clearly define Elon Musk and crypto relationship. His vague references often leave crypto fans searching for more clues. However, his company’s stock patterns are very much comparable to the king of cryptocurrencies, Bitcoin.
Experienced investors remember how Amazon’s stock bubble popped in 2000 wiping out 90 percent of the stock’s value. Ten years later, the entire world does business with Amazon. So, even if Tesla is going to own the future, the current stock valuations demand correction.