Why You Should Care About Tesla’s Selloff

July 14, 2020
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Our main beat here at Jarvis Labs is centered around data. What’s the flow of crypto, where is it coming from, which wallet moved it, and what’s the impact on price… It’s our bread and butter. But today we’re going to mix it up a bit and take a look at the legacy market. Because there are some major warning signs flashing that bitcoin traders need to be aware of.

Yesterday the S&P 500 dropped just shy of one percent. Not a lot. Yet, when the markets are red hot and BarStool Sports David Portnoy is crushing it from a buy on Spirit Airlines, anything not in the green feels out of place.

It’s as if Federal Reserve Chairman Jerome Powell was pitching a no-hitter in baseball, but walked a batter. The end result of how the market performed over the last few weeks is incredible, but not perfect.

The imperfection of yesterday’s trading session can be summed up by two things. Tesla dropped 17% from it’s high yesterday. And the turmoil indicator… The Volatility Index (VIX), rising 18%. These are high figures for both. And remember, the S&P 500 didn’t even drop one percent. So you might be left wondering if Tesla caused the VIX to spring to life?

In a way it did. Tesla right now, in a metaphoric sense, represents retail traders on the popular stock buying app, Robinhood. These retail buyers over the last month have sent stocks flying. And digging into some of the most popular Robinhood stocks and how they performed yesterday helps us paint a picture.

Virgin Galactic Holdings (SPCE) was down nearly 14% from its high yesterday. Fuel Cell Energy (FCEL) just over 11% from its intraday high. And Plug Power (PLUG) down nearly 14% from its intraday high.

These are stocks listed on Robinhood under their most popular stocks owned by its users. And moving down the list we see an even longer list of stocks getting crushed.

Yesterday the popular retail stocks got crushed. Plain and simple. Stocks like GE, JP Morgan Chase, and Exxon Mobil hardly felt the rumble.

The volatility the VIX was picking up yesterday was from retail either losing steam or institutions shorting them. But for the sake of today’s piece, we’re going to assume the former. Retail is losing steam.

Now, you might now be saying to yourself, but this is crypto… Why should I care that the VIX went up 18% or Robinhood stocks got crushed?

Correlation. Typically bitcoin isn’t very correlated with stocks. Or other assets for that matter. But since the selloff in both crypto and equities in March, both have been strongly correlated. In fact, the current 30 day correlation of the two is 71. Which means the two are moving in tandem day to day.

And it also means if the equities market just peaked, bitcoin might get caught up in the selloff.

If this scenario does play out, it might be the last buying opportunity before the next bull run. I say this because of the various readings we keep receiving from Jarvis. You may have seen two for yourself recently… The Jarvis Index and its Stablecoin version. These are both pointing to significant upside over the next year or so.

Therefore, if yesterday continues and equities begin to soften up… and eventually spark a selloff, bitcoin might get caught up in the madness. If it does, keep your stop loss tight and prepare for what might be one of the greatest buying opportunities before the next major bull run unfolds.

Until next time, we’re on the scent…

Ben Lilly

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About Jarvis Labs: We are a team of passionate professionals with experience in data science, software engineering, economics and trading who came together to develop Jarvis, an artificial intelligence / machine learning software that tracks market movers. We’ve since gone on to become a one stop shop for crypto traders by building new tools, metrics, and platforms every day. Stop by Jarvis Labs to learn more and subscribe to our newsletter to learn what market mover is driving the market today.