Nvidia Becoming More Volatile Than Bitcoin and Ether

Nasdaq-listed Nvidia (NVDA), which Goldman Sachs has described as the world’s most important stock this year, is expected to see more significant price swings than crypto market leaders Bitcoin and Ethereum.

NVDA’s 30-day options implied volatility, which measures expected price swings over four weeks, rose to 71% annually from 48%, according to data source Fintel.

Meanwhile, crypto exchange Deribit’s bitcoin DVOL index, a measure of 30-day implied volatility, fell from 68% to 49%, according to charting platform TradingView. The ETH DVOL index fell from 70% to 55%.

Options are derivative contracts that protect the buyer from bullish and bearish price swings. Implied volatility represents the degree of uncertainty or expected price turbulence that is affected by the demand for options.

NVDA, a pioneer in all things artificial intelligence (AI) and maker of graphics processing units formerly used for cryptocurrency mining, has emerged as a sentiment benchmark for both the stock and crypto markets since the launch of ChatGPT in late 2022.

Both bitcoin and NVDA bottomed in late 2022 and have since exhibited a strong positive correlation. As of press time, the correlation between 90-day prices on bitcoin and NVDA is 0.73.

NVDA stock has fallen nearly 26% since reaching a peak of $140 last month, sending bearish signals to the crypto market. Bitcoin is locked in the $60,000 to $70,000 range, according to CoinDesk data.

According to crypto finance platform BloFin, the increase in NVDA’s implied volatility may be related to hedging activities of market makers, a phenomenon frequently seen in the cryptocurrency market.

“It should be acknowledged that negative gamma is not only dominating the cryptocurrency market. On the US stock market, SPY and QQQ experienced significant declines due to negative gamma hedging, and high volatility risk caused NVDA’s front-month implied volatility level to significantly exceed that of cryptocurrencies like BTC and ETH,” Griffin Ardern, head of options trading and research at crypto finance platform BloFin, told CoinDesk.

Negative or short gamma means that market makers trade in the direction of price movements in order to keep their overall positions neutral, unknowingly contributing to market volatility.