Is Tesla a bigger bubble than Bitcoin?

December 14, 2024

Is Tesla a bigger bubble than Bitcoin? 

That is a trick question implying that both Tesla and Bitcoin are financial bubbles. Bitcoin and Tesla believers disagree strongly on the notion of the two being bubbles. 

What is a financial bubble?

A "financial bubble" is an economic situation where the price of an asset inflates far above its "true" value, fueled by excessive market speculation, ignorant enthusiasm, and other factors (e.g. fear of missin out). Eventually, the bubble "bursts", leading to a rapid decline in price as the market sobers up from the euphoria. essentially, it's a period of unsustainable price inflation followed by a sudden crash.

Is Bitcoin a bubble?

No one knows. Some say Bitcoin lacks intrinsic value and that is essentially a scam leading to a  speculative bubble. Others propose say that Bitcoin is a true commodity, a scarce digital currency, that can be trusted more than fiat currencies.

What is Bitcoin?

Bitcoin is a decentralized digital currency that operates on a peer-to-peer network using blockchain technology. It was introduced in 2009 by an anonymous individual or group under the pseudonym Satoshi Nakamoto. Unlike traditional currencies, Bitcoin is not issued or controlled by any central authority, making it a decentralized and trustless system. Transactions are verified by a network of computers (nodes) and recorded in a public, immutable ledger called the blockchain.

Bitcoin's digital scarcity refers to its fixed supply cap of 21 million coins, as programmed into its code. This makes it inherently limited, similar to precious commodities like gold. The issuance of new bitcoins occurs through a process called mining, where participants validate transactions and add new blocks to the blockchain, earning a reward in Bitcoin. Over time, the rewards are halved (every four years in events known as halvings), reducing the rate of new Bitcoin entering circulation.

Bitcoin's limited supply ensures that the digital coin remains scarce and technically immune to inflation caused by the unlimited printing seen with fiat currencies like the U.S. dollar, the Euro, the Yuan, and all other major currencies in the world. The concept of digital scarcity has made Bitcoin attractive as a store of value and a hedge against inflation.

How was Bitcoin's Performance During the Biden Administration?

Bitcoin performed poorly under Biden. The administration adopted a cautious regulatory approach toward Bitcoin and all other cryptocurrencies. The Democratic administration emphasized regulations in the name of protecting consumers from losing money on crypto scams. 

In 2022, President Biden signed an executive order directing federal agencies to assess the risks and benefits of digital assets. This led to increased scrutiny and enforcement actions that froze the crypto markets. The collapse of major crypto trading companies such as the FTX exchange further eroded investor confidence and contributed to significant price declines. These elements collectively contributed to Bitcoin's underperformance during the Biden administration.

How is Bitcoin Doing in Relation to the Second Coming of Trump?

Bitcoin has experienced a significant surge in 2024, rising by 138% and surpassing $100,000 per unit. Unlike previous rallies, which were mostly driven by consumers or so-called retail investors, the 2024 rally is being mostly led by institutional investors making huge bets in Bitcoin.  

As everything else in the current bubble that we live in, the Bitcoin rally is closely tied to the election of Donald Trump. The Trump man supports Bitcoin and unregulated cryptocurrencies. The Trump family has been involved in various crypto businesses including NFTs and other semi scams. The Trump Media and Technology Group (ticker: DJT) is said to be investing in a crypto trading platform. In addition, Trump nominated Paul Atkins, a crypto advocate, to lead the Securities and Exchange Commission (SEC). 

The Second Coming of Trump signals a lax and favorable regulatory environment for cryptocurrencies in the next years. This regulatory shift suggests that Bitcoin and other cryptocurrencies may become more integrated into mainstream finance. 

Is Tesla a bubble?

No one knows. You only know a bubble after it bursts. Some say Tesla is significantly overvalued and that everything is based on speculation without any fundamentals backing up a share price of 116 times earnings for an automaker. Others say that Tesla is undervalued and that is poised to take over the world with robots of all sorts that will solve climate change and all known problems on Earth, becoming soon the most valuable company on Earth.  

What is Tesla?

Tesla, Inc. is an American multinational company that designs, manufactures, and sells electric vehicles (EVs), energy storage systems, and solar products. Tesla was founded in 2003 by Martin Eberhard and Marc Tarpenning. Tesla is now led by Elon Musk, who joined the company as its CEO in 2008. Musk is also Tesla's biggest shareholder, owning about 20% of the company. Tesla's mission is to "accelerate the world's transition to sustainable energy."

Tesla's Core Business Areas

1. Electric Vehicles (EVs): Tesla produces a range of EVs, including:

• Model S (Luxury Sedan): Starting at $79,990 for the base All-Wheel Drive (AWD) variant. The high-performance "Plaid" version is priced at $94,990. 
• Model 3 (Affordable Sedan): The base Rear-Wheel Drive (RWD) model starts at $42,490. 
• Model X (SUV): The Long Range AWD version begins at $77,990, while the "Plaid" variant is available for $92,990. 
• Model Y (Compact SUV): The RWD model starts at $44,990, with the Long Range AWD at $47,990, and the Performance version at $51,490. 
• Cybertruck (Electric Pickup Truck): The single-motor RWD model is expected to start at $60,990, with dual-motor AWD and tri-motor "Cyberbeast" variants priced higher. 
• Tesla Semi (Electric Semi-Truck): Pricing details have not been officially disclosed.

2. Energy Storage: Tesla offers products like Powerwall (home battery), Powerpack, and Megapack (commercial-scale energy storage), which store renewable energy for residential and industrial use.

3. Solar Energy: Through its Solar Roof and solar panel products, Tesla provides renewable energy solutions for homes and businesses.

4. Autonomous Driving Technology: Tesla develops advanced driver-assistance systems, including Autopilot and Full Self-Driving (FSD) capabilities, aiming for fully autonomous vehicles.

5. Supercharging Network: Tesla operates one of the largest global networks of fast chargers to support its vehicles.

Tesla revolutionized the automotive industry by proving the viability of EVs. Tesla's ability to scale production and expand into new markets has positioned it as a leader in sustainable energy solutions.

Tesla and the Second Coming of Trump

In July 2024, Elon Musk endorsed Trump for President and began donating funds and raising funds for Trump. Between July 2024 and December 13, 2024, Tesla's market capitalization has more than doubled, increasing by approximately 102.5%.

• On July 26, 2024, Tesla's market cap was approximately $702.2 billion, with shares priced at $219.80. By December 13, 2024, the market cap had risen to about $1.422 trillion, with shares at $436.23. 

Tesla's Market Cap Increase:  $719.8 billion ($1.422 trillion - $702.2 billion) =Percentage Increase: ($719.8 billion / $702.2 billion) × 100 ≈ 102.5%

Elon Musk donated approximately $270M to the Trump campaign. The investment paid godly well, essentially netting the South African about $200 billion. Between July 2024 and December 12, 2024, Elon Musk's net worth increased significantly, primarily due to the appreciation of Tesla's stock and the rising valuation of SpaceX. Both companies are believed to do super well during the Second Coming of Trump. The president-elect has chosen Musk to the lead oligarch of the transition of power as me move into the United States of Trump.

As of July 1, 2024, Musk's net worth was approximately $221.4 billion. By December 12, 2024, his net worth had reached around $439.2 billion. This was a $217.8 billion (98.4%), almost doubling his fortune in less than 6 months. 

Bitcoin and Tesla Return on Investment in the Past 10 Years

Comparison:

Bitcoin ROI: ~27,400%

In the past ten years, Bitcoin's rate of return (ROI) has been an outstanding 27,400%. 

• As of December 13, 2024, Bitcoin is trading at approximately $96,783.38 per coin. Ten years ago, on December 13, 2014, Bitcoin's closing price was around $351.92. This leads to a return on investment (ROI) of approximately 27,400% ((96,783.38 - 351.92) / 351.92) × 100 ≈ 27,400%. 

Each dollar invested in Bitcoin ten years ago would be worth approximately $275 ($1 + $274) today. Bitcoin doesn't have intrinsic value other than its digital scarcity. 

Tesla ROI: ~2,842%

Tesla has done very well in the past 10 years, but is nowhere near Bitcoin. 

• Ten years ago, on December 13, 2014, Tesla's share price was $14.83 (adjusted for splits). On December 13, 2024, Tesla's stock closed at $436.23. This gives an ROI of approximately 2,482% ((436.23 - 14.83) / 14.83) × 100 ≈ 2,842%. 

Each dollar invested in Tesla ten years ago would be worth approximately $29.42 today.

Over the past decade, Bitcoin has significantly outperformed Tesla in terms of return on investment. Bitcoin has performed almost 10 times better than Tesla. 

Is it too late to invest in Bitcoin and Tesla?

We don't trust either one, but most market professionals are pushing them strongly. Both Bitcoin and Tesla will most likely continue rising meteorically in 2025. We believe that the whole market is moving quickly into an unsustainable Trump bubble that will most likely burst in mid 2026.

In the meantime, we are happy to see so many people making so much money from their Bitcoin and Tesla holdings. We wish them the best and hope the party can somehow last forever. The wealth generated in one sector leaks to all other sectors. The wealth generated by Bitcoin and Tesla can help all other sectors of the economy. 

Some say that Bitcoin can get to a $1M per coin valuation within the next 10 years, and that Tesla can surpass the $3.5 trillion market capitalization and maybe become the most valuable company on Earth. Many believe that Elon Musk, a South African immigrant in the United States, may become the first trillionaire in human history. All humans originated in Africa so it would be very nice to see an African becoming the first trillionaire. The accomplishment would also speak grealy about the contributions of immigrants to our economy. 

There you have it. Now you know it.

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