Memes about the Portfolio Armor Art department and Imgflip.
Elon Musk discovers Bitcoin mining Burns Coal
You know the news by now: Tesla (NASDAQ: TSLA) no longer accepts Bitcoin as a form of payment. According to Elon Musk’s tweet last night, it’s because of the fossil fuels that generate the electricity Bitcoin (CRYPTO: BTC) Mining, especially coal.
As we type this early Thursday, Bitcoin is down 11% in the past 24 hours ether (CRYPTO: ETH) down by approx. 8%. Elon Musk’s Bitcoin announcement on Wednesday evening raises some questions.
- Didn’t Musk know fossil fuels are fueling bitcoin mining when he added bitcoin to Tesla’s balance sheet earlier this year?
2. Is Musk aware that fossil fuels also generate most of the electricity that powers Tesla’s cars? For example, in the US, 80% of electricity is generated from fossil fuels, including coal.
We suspect the answer to both questions is “yes”. So what’s up? Let’s check.
Bitcoin did not increase Tesla’s share price
Since the announcement in early February that Tesla had Bitcoin on its balance sheet by Wednesday, Tesla’s shares have fallen nearly 32%.
Instead, as we speculated in the post earlier this week (Shades Of 2000 And 2008), the crypto rally may have removed some of the speculative passion that previously fueled cult stocks like Tesla.
Bitcoin increased Tesla’s profits
As Car And Driver pointed out last month, Tesla’s profits for the last quarter were due to Bitcoin sales and carbon credits, not car sales:
The company posted $ 438 million in revenue, including a “positive impact” of $ 101 million from Bitcoin sales and $ 518 million from sales of zero-emission government credits to other automakers. That means Tesla continues to lose money to make and sell vehicles.
A correction in Crypto is in Tesla’s interest
If we had to guess why Elon Musk was suddenly concerned about the fossil fuels fueling Bitcoin mining, it is because correcting the crypto is in Tesla’s best interest. First, it might require the crypto market to cool down to get speculators to deal with Tesla calls again. Second, there is the option for Musk to buy crypto at a cheaper price.
Wait, what about the fossil fuel problem?
We suspect that Musk won’t buy Bitcoin next, but Ethereum. One reason for this is that, as our Twitter correspondent Anatoly Karlin reminded us, Ethereum is moving to a proof-of-stake approach that may require 99% less energy than the proof-of-work approach that Bitcoin transactions use checked. The other reason is that Roko Mijic is a giant bull of Ethereum who believes it will exceed the price of Bitcoin.
Recall that, as we mentioned in a post last week (rotation or simulation?), Roko Mijic was responsible for creating the happy family below, in an odd twist that suggests this could all be a simulation is.
Grimes, Elon Musk and their son X AE A-XII in Starbase, Texas (photo tweeted by Musk).
Mijic isn’t the only Ethereum maximalist, but he’s one that Musk is familiar with.
At the close of trading on Wednesday, Tesla was the second largest name in our system’s daily rankings. We’ll be curious to see how that works out. In the meantime, we continue to encourage investors who own Tesla or other stocks to consider hedging. Let’s finish with a quick update.
Protection costs increase
In our previous post, we recorded the following video that shows how the market risk in a Nasdaq-heavy portfolio can be hedged by buying optimal puts for QQQ as a proxy.
At around 3:47 a.m. of this video, we show the optimal puts to hedge 1,600 QQQ shares against a decline of> 19% by next December. The costs were 2.88% of the position value. If we look for the same hedging as we did at Wednesday’s close, we see that the cost has risen to 3.33% of the position’s value.
Screen capture using the Portfolio Armor iPhone app.
Not a huge increase in protection costs, but you should probably add protection sooner rather than later if current trends continue.