Markets
Nvidia Is Becoming More Volatile Than Bitcoin and Ether
Nvidia (NVDA), listed on the Nasdaq, hailed by Goldman Sachs As the world’s most valuable stock this year, it is expected to experience more significant price swings than cryptocurrency market leaders Bitcoin and Ether.
NVDA’s 30-day options implied volatility, a gauge of expected price movements over a four-week period, recently increased from an annualized value of 48% to 71%, according to Fintel data source.
Meanwhile, cryptocurrency exchange Deribit’s bitcoin DVOL index, a measure of 30-day implied volatility, fell from 68% to 49%. according to the TradingView charting platformThe ETH DVOL Index fell 70% to 55%.
Options are derivative contracts that protect the buyer from upward and downward price movements. Implied volatility, which is influenced by the demand for options, represents the degree of uncertainty or expected price turbulence.
NVDA, a pioneer in all things artificial intelligence (AI) and maker of graphics processing units previously used for cryptocurrency mining, has emerged as a barometer of sentiment for both stock and cryptocurrency markets since the debut of ChatGPT in late 2022.
Both Bitcoin and NVDA bottomed out at the end of 2022 and have since exhibited a strong positive correlation. At the time of writing, the 90-day price correlation on bitcoin and NVDA it was 0.73.
NVDA shares have fallen about 26% since hitting a high of $140 last month, sending bearish signals to the cryptocurrency market. Bitcoin has been stuck in the $60,000 to $70,000 range, CoinDesk data shows.
According to cryptocurrency trading platform BloFin, the spike in NVDA’s implied volatility is likely related to market maker hedging activity, a phenomenon often observed in the cryptocurrency market.
“It should be noted that negative gamma is not the only thing dominating the cryptocurrency market. In the US stock market, SPY and QQQ have seen significant declines due to negative gamma coverage, and the elevated volatility risk has caused NVDA’s front-month implied volatility to significantly outperform cryptocurrencies like BTC and ETH,” Griffin Ardern, head of options trading and research at cryptocurrency trading platform BloFin, told CoinDesk.
Negative or short range This means that market makers trade in the direction of price movements to keep their overall exposure in a neutral direction, inadvertently increasing market volatility.