Key Insights:

• Bitcoin’s correlation with Nvidia has surged to 0.75, the highest rate in a year.
• Analysts express concerns that this correlation could lead to Bitcoin’s price plummeting by as much as 80%.

Bitcoin (BTC) and Nvidia stock (NVDA) are now correlating more closely than ever before, prompting market analysts to consider the risks of a market crash akin to the tech bubble of the late 1990s.

Potential Crash Risks from AI Investments

As of Friday, BTC’s 52-week correlation with Nvidia stands at 0.75, coinciding with both assets reaching record valuations this week. Nvidia’s stock has increased by 43.6% since the start of the year, surging past $195.30 on Thursday, while Bitcoin experienced a 35.25% rise to over $126,270 on Monday.

Analysts are pointing out that such tightly coupled trading could indicate Bitcoin is being treated as a high-risk tech asset, echoing sentiments of an emerging AI bubble, drawing parallels to the late-90s dot-com frenzy.

Market commentator The Great Martis mentioned that current AI-crypto hype might be a ‘double bubble.’ The numerous AI-focused agreements highlight a frenzied investment loop among major AI firms, notably OpenAI’s recent partnership with AMD worth tens of billions, which also positions AMD as one of OpenAI’s largest stakeholders.

This recent activity raises alarms as these firms repeatedly invest in one another, creating a concerning feedback loop. Such patterns are reminiscent of the dot-com era when Cisco’s investments inflated its own equipment demand, leading to unsustainable valuations.

“The Dotcom bubble caused an 80% Nasdaq crash, and we’re seeing similar irrational enthusiasm today. The crypto sector resembles a Ponzi scheme.”

• The Great Martis

Traders Caution on Overvaluation

Trader and educator Adam Khoo warns that should the current AI and crypto boom come to an end, Bitcoin could see significant declines. During the previous tech crash from 2000 to 2002, Warren Buffett’s Berkshire Hathaway thrived by not engaging with the tech market and instead holding onto profitable shares from companies like Coca-Cola and American Express.

“The overvalued and non-profitable sectors may tumble between 50% and 80% when the AI/Crypto bubble bursts,” Khoo states.

While Buffett remains distant from both Nvidia and AMD, he currently maintains a massive cash reserve of $350 billion, reflecting a cautious strategy ahead of potential market adjustments.

Important Note: This article does not provide investment advice. Readers should make informed decisions as all investments carry risks.