Talking Numbers

This is what Tesla and Bitcoin really have in common: Strategist

What Tesla and bitcoin really have in common: Strategist

People who invested in Tesla and Bitcoin can agree on at least one thing: putting money into something that will change the future can feel great until the price goes down.

Shares of electric luxury carmaker Tesla are down over 30% in the past month. Part of the price drop was triggered when the company reported modest sales below enthusiastic analysts' expectations.

The other big factor in Tesla's stock decline was several reports of fires involving its vehicles. Now the National Highway Traffic Safety Administration has opened an investigation on those incidents. That has prompted founder and CEO to take to Twitter to defend his company, saying:

Why does a Tesla fire w no injury get more media headlines than 100,000 gas car fires that kill 100s of people per year?

What makes this incredibly unjust is that the Model S to date has the best safety record of any car on the road (no injuries or deaths ever)

Tesla's stock's run this year has been remarkable, even when factoring in its fall in the last few weeks. Year-to-date, Tesla shares are up 275%. But, in the first nine months of the year, Tesla was up nearly 471%. Since October 1, Tesla has lost a third of its value.

(Read: Is Tesla the GM of tomorrow?)

This sudden rise and fall leads some to compare it to the past week's performance of Bitcoin, the virtual currency that is supposed to revolutionize money the way Tesla is supposed to revolutionize automobiles.

To be sure, Bitcoin's rally makes Tesla's price jump look like a rounding error. From the start of the year until Monday evening, Bitcoin was up 5,467% on the Mt. Gox exchange, the virtual currency's largest trading platform. From a peak of $900 during the trading on Monday, it dropped as low as $502.60 Tuesday around noon.

(Watch: )

But is it really fair to equate a virtual currency with a company that produces an actual product?

"Comparing [Tesla] to Bitcoin is a little bit tricky," says CNBC contributor Andrew Busch, editor and publisher of The Busch Update. "On a valuation, how do you do that? It's almost difficult or impossible."

But, Busch notes a couple of things they have in common. "Both of these are highflyers," says Busch. "When you get highflyers, they have a tendency to drop off when two things happen: competition and some questions over the business practices. And, that's exactly what we're seeing."

Yet Tesla's lower stock price is starting to look appealing to Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson. "I think this could be a rather compelling entry point if you keep your protective stops tight," says Ross looking at a six-month chart of the company.

To see why Ross believes Tesla is at an appealing level and to hear the rest of Busch's analysis of the company, watch the video above.

More from Talking Numbers:
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