Nvidia’s stock (NVDA) has recently shown more significant price swings than Bitcoin and Ether, surprising many in the market. This increase in volatility, measured by NVDA’s 30-day options implied volatility, has risen from 48% to 71%, surpassing Bitcoin’s and Ether’s. Interestingly, Bitcoin and NVDA have exhibited a strong positive correlation since late 2022, meaning their prices often move together. This relationship has made Nvidia a key indicator for both equity and crypto markets, especially since the rise of AI technologies like ChatGPT.
For crypto traders, this means keeping an eye on Nvidia’s stock movements could provide insights into Bitcoin’s potential price shifts. The current surge in NVDA’s volatility suggests heightened market uncertainty, which could impact Bitcoin’s stability. However, while Bitcoin remains within a range of $60,000 to $70,000, NVDA’s recent decline of 26% from its peak signals potential bearish trends for the crypto market.
Hedging activities by market makers are driving this volatility in NVDA, a common practice in the crypto market. This phenomenon, known as negative gamma hedging, means market makers trade in the direction of price moves to keep their exposure neutral, inadvertently adding to volatility. Thus, Nvidia’s rising volatility could serve as a precursor for similar trends in Bitcoin and Ether.
