In the event that markets have already bottomed and cryptocurrency starts to produce significant returns once more, the company might be caught off guard.
Even as Tesla’s CEO asserts that US inflation has already peaked, Bitcoin (BTC) is in short supply there.
Elon Musk predicted that the upcoming US recession would only be “mild to moderate” while speaking at Tesla’s 2022 Annual Meeting of Stockholders on August 5.
On costs, Musk says, “The trend is down.”
Tesla recently sold almost all of its $1.5 billion worth of Bitcoin holdings, and as a result, it is now witnessing the emergence of the kind of economic environment that risk assets thrive in.
Musk revealed that the six-month commodities pricing for Tesla parts is already falling, not rising, during a Q&A session at the annual meeting.
He claimed that the downward trend in commodities is a sign that inflation has already peaked.
The interesting thing that we’re seeing right now is that most of our commodities, most of the things that go into a Tesla — not all, more than half the prices — are trending down in six months from now, Musk said. “We sort of have some insight into where prices are headed over time,” he continued.
“This could change, obviously, but the trend is down, which suggests that we are past peak inflation.”
A recovery in risk assets, including cryptocurrencies, is possible as a result of the end of an inflationary period and the decline in commodity prices. Theoretically, this results from less tightening by the U.S. Federal Reserve due to lower inflation, which creates favorable conditions for riskier investments.
The trend will be ironic for Tesla, which divested itself of virtually all its BTC exposure last month at a profit of just $64 million, should strength return to markets and cryptocurrency outperform.
The end of an inflationary phase and the decline in commodity prices may lead to a recovery in risk assets, including cryptocurrencies. Theoretically, this happens as a result of the U.S. Federal Reserve not tightening as much because of lower inflation, which favors riskier investments.
If markets recover and cryptocurrencies perform well, it will be ironic for Tesla, which last month virtually all of its Bitcoin exposure at a profit of just $64 million.
In the second half of 2022, an upward race
The irony of Musk’s remarks was not missed by cryptocurrency commentators, and other voices are already placing their bets on a sustained stock market recovery.
One of them is Fundstrat Global Advisors, which noted this week that historically, markets find a bottom six months before the Fed stops tightening through significant interest rate increases.
The S&P 500 could reach 4,800 points in the second half of 2022, according to the firm’s forecast, which would be advantageous for the crypto markets, which are still strongly correlated with movements in equities generally.
This is important to keep in mind 👇
– markets know rates are going up
– it’s the “shock” that hurts markets
Today’s job report is not a “shock”
— Thomas (Tom) Lee (not the drummer) FSInsight (@fundstrat) August 5, 2022
The biggest asset manager in the world provided more information this week about Bitcoin’s potential resurgence, as Cointelegraph previously reported. With assets worth over $9 trillion, BlackRock has teamed up with American exchange Coinbase to offer clients exposure to cryptocurrencies.
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