Key Points:
The correlation between BTC and Nvidia has surged to 0.75, reaching its highest level in a year.
Analysts are concerned that this correlation could lead to an 80% drop in BTC prices.
The current synchronized movement of BTC and Nvidia stock (NVDA) is tighter than at any time in the past year. This phenomenon has raised concerns among some market observers about a potential crash similar to the late 1990s internet bubble.
As of Friday, the 52-week correlation between BTC and the world's leading chip manufacturer has climbed to 0.75. This occurred in the same week that both Nvidia and BTC valuations hit all-time highs.
Nvidia's stock price has risen 43.6% year-to-date, reaching a high of $195.30 on Thursday, while BTC also increased by 35.25% on Monday, surpassing $126,270.
This synchronized upward trend suggests that traders may be viewing BTC as a high-beta tech asset. However, these similarities have also sparked concerns about an AI bubble, with several analysts comparing the current situation to the internet frenzy of the late 1990s.
Market commentator The Great Martis noted that the rise of AI-related cryptocurrencies could represent a "double bubble."
The surge in AI-related trading highlights this frenzy. This week, OpenAI agreed to spend billions of dollars over the next few years to purchase AMD chips, while AMD plans to make OpenAI one of its largest shareholders.
This move is creating an investment loop among a few AI companies. For example, OpenAI signed a $300 billion deal with Oracle.
The same Oracle is serving as Nvidia's strategic computing partner, while Nvidia plans to invest $100 billion in OpenAI.
Nvidia and OpenAI are also heavily investing in another cloud computing company, CoreWeave. Nvidia has purchased $6.3 billion worth of its services, while OpenAI has committed up to $22.4 billion.
In short, these AI giants are injecting capital into each other, circulating funds within the same small circle. With AMD's involvement, analysts are calling this self-reinforcing investment loop a "huge warning signal."
This situation can be likened to the internet bubble era when Cisco funded equipment purchases, effectively stimulating demand for its own network infrastructure and inflating valuations until the bubble eventually burst.
The Great Martis pointed out, "People often forget that the internet bubble led to an 80% crash in the Nasdaq," adding:
Renowned trader and investment education expert Adam Khoo recently issued a warning, stating that BTC could become one of the biggest victims of market adjustments when the current AI and cryptocurrency craze ends.
Khoo reviewed the historical experience of the 2000-2002 market crash in his analysis. He noted that at that time, Warren Buffett's Berkshire Hathaway strategically avoided the tech sector entirely, opting instead to hold traditional companies with robust profitability, such as Coca-Cola, American Express, and Moody's, ultimately achieving a significant 80% return.
"Funds massively withdrew from the tech sector and then flowed into all non-tech sectors," Khoo emphasized in his analysis, further warning:
Notably, investment master Buffett currently holds neither Nvidia nor AMD stocks, nor has he ventured into BTC, which he once referred to as "worse than rat poison." Instead, he is sitting on a record $350 billion cash reserve, a strategy that aligns closely with Berkshire's cautious stance before the 2000 tech bubble burst.
Related: Deutsche Bank: Gold Buying Frenzy Mirrors Bitcoin (BTC) Momentum
This article does not contain any investment advice or recommendations. Any investment and trading activities involve risks, and readers should conduct their own research before making decisions.
Original article: “AI Bubble? Bitcoin (BTC) Highly Correlated with Nvidia Raises Warning of 80% Crash”
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