2024-03-16 20:08:14
The 90-day and 52-week correlation between Bitcoin BTC Price and Nasdaq-listed chip maker Nvidia is already well above 0.80.
The relationship between Bitcoin and Nvidia
Bitcoin BTC Price continues to move in tandem with Nvidia (NVDA) stock price. Some analysts are already questioning the current run-up in the chip maker’s valuation.
Meanwhile, the leading cryptocurrency by market value retreated more than 8% from Thursday’s record high of $73,798. However, prices are still up 60% from the start of the year, according to data from CoinDesk. Nvidia has pulled back 9% from its all-time high of $974, but is still up 77.5% year-to-date.
In five years, Bitcoin’s market capitalization jumped from $70 billion to $1.43 trillion. Likewise, Nvidia’s market cap has grown to more than $2 trillion from $100 billion.
ChatGPT and other generative artificial intelligence (AI) projects are primarily responsible for the spike in chipmaker valuations. These AI projects represent a significant increase in demand for Nvidia’s processors.
The 90-day correlation coefficient between the two instruments rose to 0.86, the highest since May 2023. The correlation turned positive already in November, according to TradingView data. The 52-week correlation has been consistently positive since July 2020 and has now risen to 0.88, the highest level since January 2023.
A coefficient above 0.80 indicates that Bitcoin and NVDA are highly correlated. That is, they tend to move in the same direction.
52 week correlation between BTC and NVDA. (TradingView/CoinDesk) (TradingView/CoinDesk)
Will the AI balloon pop?
The statistical correlation is notable as some market watchers, including the GMO investment management firm, are already worried that the AI craze is similar to the dot.com bubble of 2000, which ended in a nasty burst.
The launch of ChatGPT in December 2022 helped raise general awareness of AI. At the same time, demand for AI stocks also increased, i.e. a “bubble within a bubble” began to form, explained Jeremy Grantham, GMO’s chief investment strategist, in a publication. Both Bitcoin and Wall Street’s tech Nasdaq hit their lows in December 2022.
All technological revolutions like this – from the Internet to telephones, or even going back to railways and canals – are characterized by huge early hype and a stock market bubble. As investors focus on the ultimate potential of the technology, they are pricing this into the current stock price and very long-term potential
Grantham noted.
Many of these revolutions often end up transforming and playing out differently than early investors could have seen. However, many will only see this after a major disappointment when the initial bubble bursts
Grantham added.
1710649046
#Bitcoin #Nvidias #stock #correlation #skyrocketed #year