According to Cointelegraph, Bitcoin's correlation with Nvidia has reached a significant high, raising concerns among analysts about potential market instability. The correlation between Bitcoin (BTC) and Nvidia stock (NVDA) has surged to 0.75, marking its highest point in a year. This development has led to apprehensions about a possible market crash reminiscent of the late 1990s dot-com bubble.
The 52-week correlation between Bitcoin and Nvidia, the leading chipmaker, has climbed to this peak as both entities have achieved record valuations. Nvidia's share price has increased by 43.6% year-to-date, reaching $195.30, while Bitcoin has risen by 35.25% to over $126,270. This synchronized rally suggests that traders might be viewing Bitcoin as a high-beta tech asset, fueling fears of an AI bubble similar to the dot-com era. Market commentator The Great Martis has described the AI-crypto rally as a potential "double bubble."
The surge in AI-related deals highlights the current market frenzy. OpenAI has committed to spending tens of billions on AMD chips over several years, making AMD one of its largest shareholders. This move is part of a broader investment loop among select AI companies, including a $300 billion agreement between OpenAI and Oracle. Nvidia, which plans to invest $100 billion in OpenAI, is also involved in this network. Both Nvidia and OpenAI are investing heavily in CoreWeave, with Nvidia purchasing $6.3 billion worth of services and OpenAI committing up to $22.4 billion. Analysts have labeled this self-reinforcing investment loop as a "massive red flag."
Parallels are being drawn to the dot-com bubble when companies like Cisco fueled demand for their own products, inflating valuations until the bubble burst. The Great Martis warns of a similar scenario today, citing irrational exuberance and a trillion-dollar crypto sector resembling a Ponzi scheme. Trader and educator Adam Khoo echoes these concerns, suggesting that the current AI and crypto boom could lead to significant losses for Bitcoin when it ends. Khoo recalls that during the 2000–2002 crash, Warren Buffett's Berkshire Hathaway gained 80% by avoiding the tech sector and investing in profitable companies. Khoo warns that when the AI, crypto, quantum, and nuclear bubble bursts, overvalued and unprofitable stocks in these sectors could drop by 50% to 80%. Buffett, who does not hold Nvidia, AMD, or Bitcoin, is maintaining a cautious stance with a substantial cash reserve, reminiscent of Berkshire's strategy before the tech bubble burst in 2000.
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