Here's Why Nvidia Could Crash the Tech Sector and Take Bitcoin With It
In November, investors' attention was riveted on a single Nvidia report. The company's growth was so rapid that its results began to influence the entire market.
Blogger Coin22 explains why this rally is both inspiring and frightening for investors, how a potential AI bubble is forming, and why its consequences are directly reflected in Bitcoin.
Why Nvidia has become the nerve center of global markets
Coin22 describes Nvidia as a company around which a huge part of the financial system now revolves. Its stock price has surged over 1,600% since the launch of ChatGPT, and its market cap has increased so dramatically that it has outpaced the combined value of Amazon, Tesla, and MetaTrader. Such scale is pushing the market to believe this growth will never end.
The author points to a key problem. The AI industry operates on a system where money flows in a circular fashion between Microsoft, Nvidia, OpenAI, and Oracle. Companies invest in each other, buy equipment, lease computing power, and record these expenses as revenue growth. Economic activity appears strong on paper, but real profits are much slower to materialize. This structure creates the risk of overheating.
According to Coin22, one weak quarter for Nvidia could disrupt sentiment on Wall Street. Investors are sharply reducing risk, funds are exiting the tech sector, and the market is losing its main source of confidence. Nvidia is becoming a pivot point for the S&P 500 and other indices.
Coin22 notes that Nvidia's report has become an indicator of the state of the growth asset economy. Investment in AI exceeds $300 billion annually, and any slowdown is seen as a warning of further development constraints. The industry is growing rapidly, but faces a data shortage and enormous infrastructure costs.
How the AI boom echoes Bitcoin's dynamics
The author demonstrates that the crypto market is closely linked to the technology sector. Bitcoin moves in tandem with the NASDAQ, so weakness in tech companies is reflected in cryptocurrencies almost immediately. When demand for risky assets declines, pressure on Bitcoin increases.
Spot ETFs are exacerbating the situation. They hold approximately 1.4 million coins, close to 7% of the maximum supply. BlackRock holds approximately 780,000 BTC, making it the largest institutional holder. The mechanics are straightforward: inflows support the price, while outflows dampen it. When more than $500 million was withdrawn from BlackRock's fund in a single day, the market felt the pressure almost immediately.
Coin22 cites examples. In February, total outflows reached $3.3 billion, and Bitcoin simultaneously lost 17%. In November, the total decline was 28%, amid renewed selling by ETFs. Funds operate without emotion, guided by risk rules, so decisions to reduce positions are made quickly.
The author considers MicroStrategy's position a particular risk. The company holds approximately 650,000 BTC with an average purchase price of $74,500, and its market value is already below the price of these bitcoins. It also holds convertible bonds, and the possibility of being excluded from MSCI indices, according to analysts, threatens to sell off between $2.8 billion and $8.8 billion. Such movements increase market pressure and impact Bitcoin's price action.
What can the combination of these factors lead to?
Coin22 emphasizes that signs of overheating around AI and Bitcoin are present, but do not signal the onset of a crisis. Mutual investment schemes in the AI sector, the concentration of Bitcoin in ETFs, MicroStrategy's numerous risks, and the crypto market's dependence on Wall Street sentiment are increasing volatility, but do not mean the market is on the brink of collapse.
The industry continues to be driven by strong drivers: high-quality reports from tech companies, growing investment in AI, major funds' interest in digital assets, and the expanding global adoption of cryptocurrencies. The current period appears to be a phase of cooling and restructuring.
Coin22 believes the market requires careful attention and a willingness to change. The ability to adapt to changing conditions is becoming a key tool for those looking to maintain their positions during periods of high volatility.
Source: cryptonews.net
