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Tesla's Biggest Drop Indicates a Stock Market Downtrend—Implications for the Bitcoin and Crypto Market

Yesterday, Tesla stocks plunged dramatically, suffering their biggest loss since going public. 

The tech giants stock also plummeted, with the Dow Jones Industrial Average dropping by 2.3% and the Nasdaq Composite losing by 4.1%.

Tesla stock plummets

The electric-car maker’s stock—Tesla dropped by 21% in what investors deemed a terrible trading day, suffering its biggest drop yet. Tesla stock has been reported to have lost around 33.7% of its gains, falling from grace from a high of $498.32 in the past week.

According to reports by Blockchain.News, there appeared to be clues that the stock would undergo a massive sell-off. One of the indicators seemed to be when investment management firm Baillie Gifford, a long-time shareholder of Tesla stock, solid its shares and cashed out its gains at the same time as the electric car and battery maker’s stock hit a record high.

With Tesla stock’s bearish momentum, the market has suffered a huge loss as it continues its stock market downtrend.

On March 18, Tesla’s price was trading around $70.10. It reached a record-high of $502.49 on September 1, but the Tesla stock has since then plunged in value, trading around $330 on NASDAQ at the time of writing.

Bitcoin breaks $10K

As for the crypto market, there appears to be significant movement and high volatility as well. After recording lows of $3,600 on BitMEX on March 13, Bitcoin, the top cryptocurrency by market capitalization, hit its high of the year, surging to $12,400.

Since then, Bitcoin has fallen back from $12,400 and seems to be consolidating around $10,000.

We have explained why the Bitcoin and crypto market is expected to crash before the opening of the Dow Jones. In order to prevent another dip from happening, the Bitcoin price needs to stay above the 90-day moving average.

Source: TradingView

At press time, Bitcoin (BTC) broke below the $10K and rebounded a bit again. As the chart showed, the 90-day moving average can hardly be seen as the support level anymore. Should BTC pricing experience another dip in the future, the 90-day moving average would instead turn into a strong resistance level.

Related: 3 Reasons Bitcoin and Crypto Market Will Crash Again

A Case of Bad Sushi

The crypto market also suffered a huge loss over the past week, with the SushiSwap (SUSHI) token crashing after its anonymous founder cashed out. The price of the SUSHI token, which reached a high of $15.97 on September 1, plummeted to $1.13 in the following days, plunging to one of its lowest price levels.

The nosedive experienced by the crypto market could therefore be in part attributed to SushiSwap (SUSHI) token price, which will test the 5-day moving average (MA) soon.

Source: Binance

However, if there are not enough funds to support the SUSHI token price, the fall of SUSHI would overlap with Bitcoin’s price drop and the stock market going down. These overlaps will cause a crash for the crypto market again.

Why are the stock and crypto markets crashing?

There seem to be no signs of fast recovery for the stock and crypto market, with a lack of new money supply influx. Additionally, investors earning a quick profit through pump and dump strategies and cashing out their profits on a short-term market run seem to be inhibiting the market’s recovery. Although the US dollar has risen a bit and given investors a bit of hope, there seem to be no signs of any bullish momentum for the markets, as economic stimulus packages have not yet been rolled out by the United States government.

The stock market seems to be on the verge of a downtrend again, and consequently, it may lead to the plunge of the crypto market along with it.

Bitcoin whales

For Bitcoin, many companies and financial institutions are showing an increased interest in buying the cryptocurrency asset. As reported by Blockchain.News on August 11, MicroStrategy purchased 21,454 BTC for $250 million, averaging $11,652. 84 per Bitcoin. In addition, Grayscale Investments’ parent company Digital Currency Group (DCG) also invested $100 million into Bitcoin mining projects. This endorsement of the digital asset by big-name firms could in turn drive up the Bitcoin price. However, whether it is enough to save the crypto market from another downtrend is still up for debate.

With additional reporting provided by Kun Hu.

Bitcoin’s Price Remains Stable Despite Crypto Market Crash, BTC Matures into a Less Volatile Asset

Bitcoin’s price plunged to under $23,000 in the past 24 hours, before recovering to trade at the highs again above $24,000. The world’s largest cryptocurrency has seen slight volatility, and has dropped back down below the $23,000 level, before gaining strength to trade at $23,172 at press time.

Ethereum’s price has also seen a steep plunge, trading dropping by over 6% in the past 24 hours. ETH’s price has plunged below the $600 support level, and is now trading at $582 at press time.

Other large cap altcoins have also seen massive drops in prices, with Bitcoin Cash (BCH) crashing over 12% in the past 24 hours, Polkadot (DOT) dropped 6%, Chainlink (LINK) dropping over 14%, and Cardano (ADA) losing over 10%.

While Bitcoin retraced to $22,900, the world’s largest cryptocurrency’s market price is still up by over 8% in the past week after recording a new all-time high. Crypto analytics firm Santiment noted that this is often seen with Bitcoin’s volatility, altcoins did not see favorable returns during this massive sell-off. Santiment noted:

“Despite #Bitcoin’s retrace down to $22.9k today, its market price is still up 8% over the past week after hitting its current ATH of ~$24,150 on 12/20. As is often the case during $BTC volatility, most #altcoins have not seen such favorable returns.”

Although Bitcoin has witnessed a slight drop lately, many analysts are still bullish on the cryptocurrency.

According to Ki Young Ju, CEO of Cryptoquant, 12,006 Bitcoins flowed out from Coinbase in the past 24 hours, which went to custody wallets. The CEO said that it seems that Coinbase makes a new cold wallet for each customer after each OTC deal for institutions. With the increase of institutions adopting Bitcoin, its price is most likely to go up.

Bitcoin’s dominance is also reaching new highs as Ripple (XRP) has continued to crash after its ordeal with the SEC, which could only mean good news for the BTC price.

Mike McGlone, senior strategist at Bloomberg recently commented on Bitcoin’s recent bull run. McGlone noted that there are more reluctant BTC sellers this time, compared to the massive Bitcoin rally seen in 2017. According to McGlone, Bitcoin would be less prone to steep corrections in 2021 than in 2017.

Wall Street Legend Explains How Bitcoin Could Collapse

Bitcoin has wrapped up 2020 with a significant increase in price. After starting last year at lows of $4,748, while the Covid-19 pandemic took place, the cryptocurrency increased to just below $30,000 by the end of the year. Since then, Bitcoin has risen to all-time highs above $38,000, making headlines daily amid dramatic fluctuations that have served to make investors wary.

Legendary economist Burton Malkiel has issued warnings over the cryptocurrency’s future. The author of the book “A Random Walk down Wall Street” has explained how Bitcoin’s price surge has often accompanied a period of international tension.

According to Malkiel, Bitcoin holders “often reside in countries with weak rules of law” and “tenuous property rights”. He said that Bitcoin could be perceived favourably in North Korea as the country appears to be mining the cryptocurrency to fund its regime.

In the past, many economists have associated Bitcoin’s growth with an “index of money laundering.” However, Malkiel seems to claim that an introduction of legislation could burst and inflate the price of the leading cryptocurrency.

Malkiel said:

“Governments can be expected to crack down on the use of Bitcoin and other cryptocurrencies for illegal transactions.”

He stated that US President Franklin D Roosevelt made it illegal for American citizens to hold gold in 1933. He mentioned: “All governments have rightly been very particular about their sole right to issue and control currencies.”

He said that Bitcoin mining could prove problematic as the process consumes huge amounts of electricity and that presents an opportunity and an argument for any government intending to crack down the cryptocurrency.

Malkiel said: “Since Bitcoin mining operations use considerable computer power and are energy-intensive, restrictions can be imposed on the computers that run the public distributed ledger central to the transactions network.” He further added:

“Governments can shut down the exchanges on which cryptocurrencies are traded.”

Calling for Bitcoin Regulation

Cryptocurrencies and in particular Bitcoin continue to attract lots of attention. Alarming cases of crypto scams and money laundering incidences have led to renewed and intensified calls for government authorities across the globe to begin regulating digital currencies. Recently, Christine Lagarde, the President of the European Central Bank, has called for global regulation of Bitcoin, saying that in some cases the crypto has been used for money laundering activities and that any loopholes should be closed. She joined a number of regulators around the world demanding for the introduction of global rules for crypto assets.

Regulation is among the most vital factors affecting the price of Bitcoin. The crypto’s rise has been adversely affected every time a government has cracked the policy whip.

For instance, many observers attributed the recent crash in crypto markets to government action by China and South Korea.

Algorand Foundation Faces $35M Losses from Exposure to Hodlnaut

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The Algorand Foundation, whose mission is to empower the ecosystem of Algorand blockchain cryptocurrency protocol, on Friday announced that it has a $35 million exposure in USDC to Singapore-based troubled crypto lender Hodlnaut. Last month, Hodlnaut halted withdrawals, deposits, and token swaps, citing market volatility.

The Algorand Foundation said the above figure represents 3% of its assets, stating that it does not expect operational or liquidity issues due to its exposure.

“As part of the Foundation’s mission, from time to time, we invest a portion of our surplus treasury capital to generate yield for the purpose of Algorand ecosystem development, and these funds were invested for that purpose,” the foundation said.

The Algorand Foundation stated that it is pursuing all legal actions to maximize asset recovery from Hodlnaut.

On August 29, the Singapore High Court appointed Algorand’s nominees, Angela Ee and Aaron Loh of EY Corporate Advisors, to act as the interim judicial managers of Hodlnaut, the foundation said.

Hodlnaut’s withdrawal pause followed other crypto lending firms such as Celsius Networks, Voyager Digital, Babel Finance, and Vauld freezing withdrawals as well.

Hodlnaut suffered heavy losses from the TerraUSD crash. The company had invested some $317 million in TerraUSD (UST), a failed stablecoin, as a way to pass high yields through to its clients.

In May, Terra’s algorithmic stablecoin UST lost its peg and collapsed, directly wiping out more than $43 billion from the ecosystem. The crash inflicted losses of $189.7 million on Hodlnaut.

As a result, Hodlnaut stopped offering exchange services on its platform on August 8, citing a liquidity crisis and the need to work on a recovery strategy as the industry battles to survive in the wake of a collapse in the crypto prices.

Hodlnaut started operating as a lender for clients to borrow digital assets in April 2019. The service also provides a yield-earning feature that enables customers to earn up to 7.25% on their investments. By allowing users to lend money to verified institutions and businesses, Hodlnaut’s incentive structure functioned.