Category: Facebook

$50B wiped from Tesla after BTC buy — but MasterCard and Twitter surge

Tesla’s stock fell 7% following its announcement that it invested $1.5 billion of its cash reserves in the cryptocurrency.

Electric car manufacturer Tesla has seen more than $55 billion wiped from its market cap since announcing the purchase of $1.5 billion in Bitcoin four days ago — but Twitter and MasterCard have headed in the other direction.

Since Tesla’s announcement on Monday, the electric car giant’s stock price has dropped 7% from $869.52 ($834.6 billion market cap). It is currently trading at $811.66 ($779 billion market cap).

While there may be other factors behind the share price drop, some investors, such as Baker Avenue Wealth Management chief strategist King Lip, are concerned that holding 8% of the company's cash reserve in a volatile asset is an unnecessary risk, stating:

“It will add volatility to the stock due to exposure to Bitcoin. This is better for Bitcoin than it is for Tesla.”

Tesla stock has been known to disregard the opinion of financial analysts in general with financial magazine Barron’s stating no more than 40% of analysts have rated its shares a ‘Buy’ since 2018.

Former Bernstein analyst and Bitcoin skeptic Gary Black stated two weeks earlier that he would sell his Tesla stock if they added Bitcoin to the balance sheet. True to his word, he announced his exit on Twitter, but also added that he will get back in:

Only 90 minutes later he revised his prediction for the carmaker’s stock to $960 dropping only $40 from the previous estimate of $1,000. This led some Twitter users to question if he really believes his figures since he had just exited his position.

Included in the sell-off was Elon Musk’s younger brother and Tesla director Kimbal Musk, who sold 5% of his shares for $25.6 million. Another director, Antonio Gracias, also sold more than 150,000 shares one day after the Bitcoin announcement, according to securities filings.

Despite the timing, there is no evidence that these sales are related to the recent Bitcoin news. And for that matter, it's unclear of what impact the Bitcoin buy had on the share price, given news also broke this week that Tesla had been called in by Chinese government regulators for talks over quality issues in its electric cars.

It's also clear that not all stock investors are Bitcoin-adverse. Social giant Twitter’s stock surged following comments that the firm might soon buy into Bitcoin. During an interview on CNBC’s Squawk Box on February 10, the tech firm’s chief financial officer Ned Segal said the company is considering adding the cryptocurrency to its own books and using it for Twitter employee’s salaries.

In the two days following the interview, Twitter stock rose almost 15% from $59.88 to $68.56, just shy of its all-time high of $69.

Similarly, MasterCard stock surged 4% following the announcement that it will support multiple cryptocurrencies on its network this week.

Big companies investing in Bitcoin will not necessarily translate to a much higher market cap: if Apple, Microsoft, Facebook, Twitter, MasterCard, and Google were to invest 8% of their cash reserves in Bitcoin, this would only translate into less than US$8 billion investment in total. That's less than 1% of Bitcoin’s current market cap. However, the signal it sends would likely drive other companies and retail investors to jump on the bandwagon.

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Crypto leaders worry over threat to industry from ‘big tech’ censorship

Social media users are leaving traditional providers in droves in favor of more independent platforms over fears of unwarranted data collection, censorship, and refusal of service.

A change to WhatsApp’s terms of service has triggered a mass exodus from the messaging platform to more private and independent rivals like Telegram and Signal, which have registered millions of new users over the last week. 

Rather than agreeing to new terms specifying the app’s right to share user data with Facebook, millions of WhatsApp users simply gave up using the platform, abandoning it for less-intrusive competitors. Telegram alone has been downloaded 25 million times in the last 72 hours.

Some of those new sign-ups include refugees from the free speech platform Parler, looking for a way to connect and organize after the right-wing Twitter alternative was suddenly yanked offline by hosting services provider Amazon Web Services (AWS).

The ability of web hosting giants like AWS to unilaterally close down sites and infrastructure has some in the cryptocurrency industry worried for the future health of blockchain-related projects.

Ethereum co-founder Vitalik Buterin described Parler’s takedown as “very worrying” in a series of tweets, noting that AWS was much more of a “common infrastructure provider” than a social media site. Buterin also expressed a certain level of dismay over Twitter’s decision to permanently ban President Donald Trump from its platform:

“The fact that so many people who would normally never support such corporate power are now cheering tech CEOs running roughshod over democratically elected officials deserves some introspection…”

In the past, estimates have suggested that around 60% of Ethereum nodes run on AWS.

EOS and Bitshares co-founder Daniel Larimer recently called for the mass abandonment of big social media platforms prior to the takedown of Parler. He correctly predicted that it may have been the “last chance” to download certain social media apps. Larimer recently quit his position as CTO at EOSIO developers, vowing to work on censorship-resistant platforms which he believes will become increasingly important as more people find themselves banned or suspended from traditional platforms.

Other crypto projects are wary of the centralized nature of tech giants like Amazon and anticipate problems relying upon them. The decentralized liquidity network THORChain, for example, incentivizes nodes running its software to avoid AWS by awarding them extra perks for using alternative service providers.

Decentralized solutions providers, like domain name server Handshake, are censorship-resistant in that they avoid reliance on classical processes for domain name resolution. Pirate academic journal archivists Sci-Hub switched DNS providers using Handshake, as mentioned by Buterin.

Censorship concerns aren’t the only reason why reliance on a single hosting service provider poses risks to crypto-based services. In November, AWS outages affected Coinbase, causing users to have problems logging in to and navigating their accounts.

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