Bitcoin
Nvidia (NVDA) Becomes More Volatile Than Bitcoin (BTC) and Ether (ETH)
Nasdaq-listed Nvidia (NVDA), acclaimed by Goldman Sachs As the world’s most important stock this year, it is expected to see more significant price swings than cryptocurrency market leaders Bitcoin and Ether.
NVDA’s 30-day options implied volatility, a gauge of expected price swings over four weeks, recently rose from 48% annualized to 71%, according to Fintel data source.
Meanwhile, cryptocurrency exchange Deribit’s bitcoin DVOL index, a measure of 30-day implied volatility, fell to 49% from 68%, according to the TradingView charting platform. ETH DVOL index dropped from 70% to 55%.
Options are derivative contracts that protect the buyer from upward and downward price swings. Implied volatility, influenced by the demand for options, represents the degree of uncertainty or expected price turbulence.
NVDA, a leading artificial intelligence (AI) company and maker of graphics processing units previously used for cryptocurrency mining, has emerged as a barometer of sentiment for the stock and cryptocurrency markets since the debut of ChatGPT in late 2022.
Both bitcoin and NVDA bottomed out in late 2022 and since then have exhibited a strong positive correlation. At the time of writing, the correlation between the 90-day prices of bitcoin and NVDA was 0.73.
NVDA shares have fallen about 26% since hitting a high of $140 last month, offering bearish signals for the cryptocurrency market. Bitcoin has been locked in the $60,000 to $70,000 range, CoinDesk data shows.
The increase in NVDA’s implied volatility is likely related to hedging activity by market makers, a phenomenon often seen in the cryptocurrency market, according to crypto finance platform BloFin.
“It must be acknowledged that negative gamma is not just dominating the crypto market. In the US equities market, SPY and QQQ have seen significant declines caused by negative gamma hedging, and high volatility risk has led to NVDA’s front-month implied volatility levels significantly outperforming cryptocurrencies like BTC and ETH,” Griffin Ardern, head of options trading and research at crypto finance platform BloFin, told CoinDesk.
Negative or short range means that market makers trade in the direction of price movements to keep their overall exposure directionally neutral, inadvertently increasing market volatility.