Bitcoin and Tesla in 2020

I wanted to quickly examine Bitcoin and Tesla since the start of the year. Both assets are really fascinating. They are, in some respects, doing the same thing: changing an old industry with an entirely new approach and not much care for what any of the critics or competitors say or do.

They know what must be done and they are on the path.

The orange line shows Bitcoin, the red and green candles show Tesla, and the white line at the bottom of the chart shows a correlation between the two. Note: the correlation has a length of 20, so be aware as that is the setting I wanted to look at. The reason why I wanted to chart the correlation of both assets is to test something: the same people who buy and own Tesla are generally the same people who buy own Bitcoin. There seems to be some similarities in the two schools of thought - breaking down walls, sparking change, and pushing new models forward.

I was surprised to see that Tesla was outperforming Bitcoin by so much. Tesla is up 490% YTD and Bitcoin is up 158% YTD. In some respects, Bitcoin might be able to catch Tesla, but perhaps we should save that for 2021. Additionally, Tesla has a market cap that is more than $100 billion bigger than Bitcoin. For now, though, this makes sense. Tesla is producing cash flows and bringing in fans, customers, and money. Bitcoin, on the other hand, is still somewhat not fully proven as a cash generating asset beyond its appreciation as a store of value. DeFi has helped and so has staking, but it is still early for both of these concepts. One could make the argument that Bitcoin's market cap is the collective market cap of banks everywhere because Bitcoin is potentially their biggest threat.

We shall see. That's the ultimate bull case for Bitcoin. The same way Tesla changed the auto industry Bitcoin may change the financial industry.

For now, however, I wanted to make this chart to highlight a few things as the year comes to an end:

1. Tesla had a remarkable year climbing 490%. 490%! Whoa.
2. Bitcoin is also having a great year, but I was surprised to see that Tesla is outperforming it by so much. Both are risk-on assets.
3. The correlation between Bitcoin and Tesla says a lot. One way to think about this is how many traders or investors who Bitcoin also own Tesla? Or the other way around? It seems quite a bit. They attract the same style of thinker.

Thanks for reading. I am not writing this as a bullish or bearish idea, but mostly to share some of my thought processes and interesting charts. I'll have more later. Especially as 2021 approaches and we begin to reset the YTD performance chart.