The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Nvidia giveth, Bitcoin taketh away
Nvidia results were great and their guidance was great. They reassured markets that the AI landscape was healthy and growing and that projected growth rates were fine and dandy. NVDA climbed in after-hours trading and opened up about 4 percent. The rest of the market climbed as well and the S&P opened up 110 points. Risk-on was the name of the game this morning. The first major market to show stress was Bitcoin. BTC started to materially drop around 8:30 AM and it accelerated in morning trading. Apparently, Owen Gunden, one of the richest and earliest Bitcoin holders, dumped his last Bitcoins on Thursday. That market did not digest that news well and BTC lost 4% after being bid in the premarket. US Treasury yields fell across the curve.
Every Mag 7 stock rallied this morning and the broader equity market took that leadership and ran with it. Precious metals did the same. As Bitcoin soured, these other markets eventually went south as well. Stocks and precious metals traded almost in lockstep with each other. This is an interesting linkage that is a recent phenomenon.
Bitcoin’s influence today is *new.* This is interesting because Bitcoin has usually been a coincident risk asset. If risk-off was the mood of the day, Bitcoin would drop *with* stocks. Today Bitcoin *led* the risk-off capital market moves. It *caused* the overall mood to sour and its downside momentum spilled into other markets, much larger and older markets.
Maybe this is a positive sign for Bitcoin? Maybe one can interpret this as markets accepting Bitcoin as a large enough, and important enough market for it to influence the other capital markets? That would be an important milestone in Bitcoin’s maturation.
However, what if this isn’t a positive sign? What if the cryptocurrencies are so levered that if the markets collapse, they will have direct repercussions on the rest of the world?
I don’t have answers. The fundamental news *seems* benign. The fact that a huge, early holder of BTC dumped his last slug, isn’t *that* scandalous.
One thing is for sure. Bitcoin now matters to the rest of us. If that market stabilizes, it’ll be business as usual. If that market implodes, even if the direct consequences are small, the psychological linkage is established and traditional markets are going to feel it.
See you tomorrow.
-Mike
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