Recently, Nvidia stock (NVDA) has shown significant price swings, surpassing top cryptocurrencies like BTC and ETH.
Unlike Bitcoin and Ethereum, which have shown declining volatility, NVDA’s 30-day implied volatility has increased significantly. This shift has grabbed the attention of analysts and investors in the market.
Nvidia’s Rising Volatility and Market Impact
According to Fintel, Nvidia’s expected price changes (implied volatility) over the next 30 days increased from 48% to 71%.
For context, implied volatility shows how much price change is expected. Its value depends on how much people want to buy options, indicating expected price changes over the next month.
While the AI chip maker stock recorded increased volatility, cryptocurrencies, known for erratic price swings, showed less.
According to Tradingview data, Bitcoin’s DVOL index on Deribit, which measures the asset’s 30-day implied volatility, has dropped from 68.48% to 49.60%. Similarly, Ethereum’s volatility fell from 70% to 55%, according to Deribit’s DVOL indexes. Griffin Ardern, head of options trading at BloFin, commented on this trend.
He said, “Negative gamma hedging has made NVDA’s front-month implied volatility level significantly surpass that of cryptocurrencies like BTC and ETH.”
Despite Nvidia’s importance, its stock has faced a sharp downturn. Nvidia’s stock has fallen more than 25% from its peak of $140 last month, marking the highest monthly decline in almost two years.
Meanwhile, Bitcoin remains relatively stable, trading around $66,050. The sharp drop in Nvidia’s stock is surprising, given its leading role in the tech market, especially in AI and crypto mining.
Notably, the rise in Nvidia’s volatility is due to the market maker’s hedging activities. Griffin Ardern called it negative gamma, which happens often in the crypto market. However, this occurrence isn’t only prevalent in crypto; NVDA’s volatility data proves so.
“It must be admitted that negative gamma does not only dominate the crypto market,” said Griffin.
Nvidia’s Role in Crypto and AI
Nvidia has become crucial in both the AI revolution and the crypto-mining industry. The company’s GPU technology provides advanced mining solutions to the industry.
Recently, Nvidia’s CEO, Jensen Huang, highlighted the transformative impact of AI. Huang emphasized:
“Everybody will have an AI assistant. Every single company and every job within the company will have AI assistance.”
He also said that AI could use energy more efficiently with faster computing. Furthermore, Goldman Sachs called Nvidia the “most important stock on planet Earth” this year.
Since late 2022, Nvidia’s stock has become a key indicator for both equity and crypto markets. The correlation between Nvidia’s stock and Bitcoin is strong; according to a source, the 3-month correlation between BTC and Nvidia is 0.71.
The source added that holding Nvidia stock and Bitcoin together in a portfolio can reduce certain risks compared to keeping just one of them. Surprisingly, both hit bottom in late 2022 and have shown similar trends.
Nvidia’s stock performance has been impressive, with only six down months since September 2022. The recent volatility spike in Nvidia’s stock could signal more price swings ahead. Nvidia’s significant role in AI and crypto mining makes it a crucial player in both markets.
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
