Elon Musk and Tesla are facing accusations of market manipulation and insider trading in a lawsuit filed by cryptocurrency investors seeking damages of $258 billion. This is the third amendment to the lawsuit, first filed in June last year.
The latest update centers on claims that Musk sold around $124 million of the cryptocurrency Dogecoin in April after he replaced Twitter’s logo with that of a Shiba Inu dog used by Dogecoin, causing the Dogecoin price to increase by 30%. Musk and Tesla are accused of taking a “deliberate course of carnival barking, market manipulation and insider trading” that defrauded investors1.
Musk’s actions regarding Dogecoin have been in the public eye for a while, including when he suddenly changed the logo of Twitter (which he bought for $44 billion late last year) to the Dogecoin dog. Musk has also allowed people to buy merchandise for Tesla and his rocket company SpaceX with Dogecoin. He has named Dogecoin as his “fav” cryptocurrency in early 2019 and has tweeted a Doge meme with the caption “dogecoin rulz”1.
A U.S. judge said this week he would “likely” allow the third amended complaint, saying the defendants would not likely be prejudiced, but granting the investors’ request to dismiss the nonprofit Dogecoin Foundation as a defendant1.
In response to an earlier iteration of the lawsuit, Musk’s lawyers said that the Tesla CEO’s public statements and Twitter posts were too vague to be considered fraud and called the lawsuit a “fantasy”1.
Will TESLA Buy Back Shares To Boost Stock Price?
The primary proponent of a share buy-back has been billionaire Leo Koguan, who claims to be the third-largest individual shareholder in Tesla. Koguan has been advocating for Tesla to buy back its shares as the company’s share price continues to fall. He suggested that the company should announce plans to buy back $5 billion of Tesla shares this year and $10 billion next year. Koguan also mentioned that Tesla should use its free cash flow to fund the buyback, and it shouldn’t affect its existing $18 billion cash reserves1.
Koguan believes that Tesla’s free cash flow, which amounted to $2.2 billion in the first quarter of the year, is expected to climb to $8 billion this year and $17 billion next year after capital expenditures have been factored in. He argues that Tesla can still invest in its full self-driving, Optimus bot, and new factories while also buying back its “undervalued stocks”12.
Tesla’s stock has been falling, closing down more than 6% on one of the days last week. Overall, the company’s stock has fallen by more than 30% this year. It’s worth noting that these drops followed massive stock sales by Elon Musk, who needed liquid cash to finance the $44 billion Twitter deal12.
Other Tesla investors have also advocated for a stock buyback. Alexandra Merz, a Tesla influencer, put up a petition on Change.org for a swift buyback before the end of the year. Merz and other investors argue that a stock buyback would show confidence in Tesla’s future results and return wealth to shareholders2.
On the company’s side, Musk said during Tesla’s Q3 earnings call that the company is likely to do a “meaningful buyback” next year, possibly between $5 billion and $10 billion. However, he later mentioned that it would be “up to the Tesla board” to decide on a buyback2.
Some analysts have expressed concern that the Twitter deal and Musk’s tweets could hurt consumer demand for Tesla, as well as commercial deals and government relations2
Can Copper Supply and Demand Give Us Clues?
Copper, often referred to as “Dr. Copper” in economic circles, is often used as a barometer for global economic health. This is due to its widespread application across various sectors that are crucial to the economy.
Approaching the daily copper chart with a basic 1-2-3 pattern, we can see progressive exit signals. The bearish trend will gain confirmation should price begin to dip below this trendline.
More bearish price action in Copper, while also observing Tesla prices slip from under the strong resistance line, may also give insight into some potential direction of bitcoin price.
Here’s how the price direction of copper can be considered an overview of world economic activity:
- Infrastructure and Construction: Copper is extensively used in construction and infrastructure projects, including residential buildings, commercial properties, and transport systems. If the economy is booming, these sectors tend to grow, resulting in increased demand for copper. Therefore, rising copper prices can be an indicator of strong economic activity.
- Manufacturing and Technology: Copper is an essential component in a wide variety of industrial and technological applications, including electrical equipment, automobiles, and renewable energy systems. Demand in these sectors often correlates with overall economic health. High copper prices could signify increased manufacturing activity and a healthy technology sector, indicating a growing economy.
- Commodity Markets and Investment: As an important commodity, copper prices can be affected by speculation in commodity markets. Investors often turn to copper and other commodities as a hedge against inflation or a weak currency. Therefore, a rise in copper prices could signal investor concerns about inflation or economic stability.
Recent data on copper supply and demand suggests that demand is expected to outstrip supply in the near future. According to a report from the International Energy Agency (IEA), the global copper market is forecasted to have a supply deficit of 327,000 tons in 2023.
This is due to an expected surge in copper demand from several industries, including renewable energy and electric vehicles, which is likely to outweigh the increase in copper production. The IEA predicts that in 2023, global copper production will reach 25.5 million tons, compared to global copper demand at 25.8 million tons. Furthermore, in 2024, the copper supply deficit is expected to widen, with global demand rising to 27 million tons1.
If the supply outstrips demand, we will begin to see copper prices catch a solid 1-2-3 bottom and start to build nested 1-2-3’s of support above those regions.
Can Copper Prices Predict Bitcoin Price Moves?
The correlation between the price of Bitcoin and copper has been studied by various analysts. A Coindesk article reported that Bitcoin’s price now correlates more strongly to copper futures than to traditional equity indexes. The correlation coefficient between Bitcoin and copper has risen to 0.84 from 0.27 a month ago, indicating a strong direct pricing relationship1.
Analysts often view copper as a proxy for overall economic growth, and this relationship extends to digital assets, which are also connected to macroeconomic developments1. However, conditions such as an inverted yield curve, which has historically predated economic recessions, do not bode well for Bitcoin or copper prices, as increased short-term rates and slower economic growth lead to lower demand and prices for these assets1.
Despite this, copper’s chart is less gloomy, with its price increasing close to 3% over the last month, indicating a bullish sign1. On the other hand, Bitcoin prices have been noticeably range-bound for the last 30 days1.
Jeff Currie, global head of commodities research at Goldman Sachs, has said that cryptocurrencies are an alternative to copper, not gold, when it comes to hedging against inflation. He suggests that Bitcoin and copper act as “risk-on” inflation hedges, compared with gold, which is viewed as a safe haven, or “risk off”2. This means that Bitcoin and copper hedge against inflation driven by demand, while gold hedges against inflation where supply is being curtailed2.
About the author
Doug is a full time crypto trader and the creator of the Altseason CoPilot. He is a strong believer in the small trader. He shares his biggest trading mistakes so you might avoid them, and evangelizes the strategy of making your money work for you while you do other things!