Recent data reveals a striking correlation between Bitcoin and NVIDIA's stock prices over the past year, prompting speculation about potential market implications. Both assets have experienced significant fluctuations, with Bitcoin reaching a new high above $73,000 before plunging, while NVIDIA, a leading player in AI chips, has seen a notable decline of nearly 8% in the past 5 days.
According to Coindesk, the synchronized movements between Bitcoin and NVIDIA are catching analysts' attention, particularly amidst concerns that the AI bubble, largely driven by NVIDIA, could be on the verge of bursting.
Over the past 5 years, Bitcoin's market capitalization has surged from $70 billion to a staggering $1.43 trillion, while NVIDIA's market cap has similarly skyrocketed from around $100 billion to over $2 trillion. Year-to-date, Bitcoin has risen by 60%, while NVIDIA has surged by 77.5%.
TradingView data indicates a significant correlation between Bitcoin and NVIDIA, with the 90-day correlation reaching 0.86, the highest level since May 2023. The 52-week correlation has remained positive since July 2020, currently standing at 0.88, the highest level since January 2023. A correlation above 0.8 suggests a strong tendency for synchronous fluctuations between the two assets.
Source: TradingView
Market observers, including investment management company GMO, express worries that the AI frenzy, fueled in part by NVIDIA, may resemble the burst of the dot-com bubble in 2000. GMO founder Jeremy Grantham describes the AI stock frenzy as "a new bubble within a bubble," cautioning about potential repercussions.
While concerns loom, some experts like Jeremy Siegel, a finance professor at the Wharton School of Business, maintain optimism. Siegel suggests that if NVIDIA's stock price follows a trajectory akin to Cisco's during the internet era, NVIDIA's stock could potentially double or triple from its current levels, reaching $2,700 per share, with a market capitalization of $6.8 trillion.
For the targets that you are optimistic about and have participated in, you should pay attention to examine their durability. Don't give up the potential chips in your hands too early due to lack of foresight and miss out on rare opportunities.
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