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As cryptocurrency prices crash, so will Nvidia’s stock
The bursting of the crypto bubble appears to be a bigger threat to NVDA stock than ever before.
Nvidia (VDA) stock will almost certainly outperform the Nasdaq exchange and the S&P 500 in the long run, thanks to strong demand for its chips from data centres and companies incorporating artificial intelligence. However, there are numerous indications that the bursting of the crypto bubble will have a significant impact on NVDA stock in the short to medium term.
I've previously warned that a crypto crash could derail Nvidia's stock performance. Recent events, however, have made me much more certain that cryptos are about to crash, and that the fall is likely to reduce Nvidia's stock price significantly.
Furthermore, even if cryptos do not plummet dramatically, recent developments have Nvidia's revenue from crypto miners on the verge of falling.
The Cryptocurrency Bubble Has Burst
Bitcoin (BTC) and other prominent cryptocurrency names have fallen in recent weeks, defying crypto bulls' predictions. Bitcoin has dropped 37% in the last three months, Ethereum (ETH) has dropped 38%, and Cardano (ADA) has dropped 49%. And, while I am aware that there are thousands of other cryptocurrencies, some of which have recently rallied, I am sceptical that the gains of those flash-in-the-pan names will be sustained as the overall macro environment for cryptos becomes more bearish.
For two reasons, macro trends are becoming more challenging for cryptos. One is that government stimulus in the United States is rapidly fading, while the Federal Reserve is about to dramatically reduce its own accommodations and has already begun doing so. The recent, sharp drop in the top cryptos in the aftermath of stimulus cuts and a surge in inflation has reinforced my belief that government stimulus, rather than inflation or concerns about traditional currencies, is the primary factor determining crypto prices.
Increased government regulation is another macro factor that will make the crypto environment more difficult. In the United States, Securities and Exchange Commission (SEC) Chairman Gary Gensler wants to regulate cryptocurrency exchanges this year, and the Internal Revenue Service (IRS) is also cracking down on cryptos.
Worryingly for Nvidia and NVDA stock, the Russian central bank recently urged the country's government to prohibit crypto mining. According to CNBC, "Russia is the world's third-largest player in bitcoin mining, trailing only the United States and Kazakhstan."
Furthermore, following mass protests in Kazakhstan, the government may enact new crypto regulations. Russia's central bank complained that cryptos hampered its ability to control monetary policy, saying the quiet part aloud.
I've long warned that governments will be vehemently opposed to cryptocurrencies for this reason, and the Russian central bank's statement validates my theory. As a result, I believe we've only seen the tip of the iceberg in terms of government regulation and crypto stifling.
Cryptocurrency Mining and NVDA Stock
Seeking Alpha contributor EnerTuition explained in an intriguing column published on December 27 that the demand for gaming graphics cards by crypto miners has significantly increased the average selling prices of Nvidia's graphics cards. In fact, EnerTuition claims that the prices of Nvidia chips have more than doubled in some cases in less than 18 months, and they attribute the increase to crypto miners.
As a result, if cryptocurrency prices fall and crypto miners stop purchasing Nvidia's gaming cards, Nvidia's overall gaming revenue will most likely fall. And, given that Nvidia's gaming revenue in the third quarter was $2.94 billion, out of a total Q3 revenue of $7.1 billion, such a drop would be significant for NVDA stock.
Meanwhile, even if cryptos do not fall, Nvidia's sales from cryptocurrency miners may be on the decline. This is due to a number of factors, including the possibility of a mining ban in Russia and Intel's (INTC) entry into the gaming card market this quarter. Furthermore, the Seeking Alpha contributor believes that Ethereum's impending shift to a proof-of-stake model will significantly reduce demand for Nvidia's gaming cards.
Nvidia's revenue from cryptocurrency miners appears set to fall, lowering the company's top and bottom lines significantly. Investors will most likely be able to purchase the shares at a much lower price at that point, so it makes sense to hold off on purchasing the shares for a little longer.
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By Crypto PiratesThe bursting of the crypto bubble appears to be a bigger threat to NVDA stock than ever before.
Nvidia (VDA) stock will almost certainly outperform the Nasdaq exchange and the S&P 500 in the long run, thanks to strong demand for its chips from data centres and companies incorporating artificial intelligence. However, there are numerous indications that the bursting of the crypto bubble will have a significant impact on NVDA stock in the short to medium term.
I've previously warned that a crypto crash could derail Nvidia's stock performance. Recent events, however, have made me much more certain that cryptos are about to crash, and that the fall is likely to reduce Nvidia's stock price significantly.
Furthermore, even if cryptos do not plummet dramatically, recent developments have Nvidia's revenue from crypto miners on the verge of falling.
The Cryptocurrency Bubble Has Burst
Bitcoin (BTC) and other prominent cryptocurrency names have fallen in recent weeks, defying crypto bulls' predictions. Bitcoin has dropped 37% in the last three months, Ethereum (ETH) has dropped 38%, and Cardano (ADA) has dropped 49%. And, while I am aware that there are thousands of other cryptocurrencies, some of which have recently rallied, I am sceptical that the gains of those flash-in-the-pan names will be sustained as the overall macro environment for cryptos becomes more bearish.
For two reasons, macro trends are becoming more challenging for cryptos. One is that government stimulus in the United States is rapidly fading, while the Federal Reserve is about to dramatically reduce its own accommodations and has already begun doing so. The recent, sharp drop in the top cryptos in the aftermath of stimulus cuts and a surge in inflation has reinforced my belief that government stimulus, rather than inflation or concerns about traditional currencies, is the primary factor determining crypto prices.
Increased government regulation is another macro factor that will make the crypto environment more difficult. In the United States, Securities and Exchange Commission (SEC) Chairman Gary Gensler wants to regulate cryptocurrency exchanges this year, and the Internal Revenue Service (IRS) is also cracking down on cryptos.
Worryingly for Nvidia and NVDA stock, the Russian central bank recently urged the country's government to prohibit crypto mining. According to CNBC, "Russia is the world's third-largest player in bitcoin mining, trailing only the United States and Kazakhstan."
Furthermore, following mass protests in Kazakhstan, the government may enact new crypto regulations. Russia's central bank complained that cryptos hampered its ability to control monetary policy, saying the quiet part aloud.
I've long warned that governments will be vehemently opposed to cryptocurrencies for this reason, and the Russian central bank's statement validates my theory. As a result, I believe we've only seen the tip of the iceberg in terms of government regulation and crypto stifling.
Cryptocurrency Mining and NVDA Stock
Seeking Alpha contributor EnerTuition explained in an intriguing column published on December 27 that the demand for gaming graphics cards by crypto miners has significantly increased the average selling prices of Nvidia's graphics cards. In fact, EnerTuition claims that the prices of Nvidia chips have more than doubled in some cases in less than 18 months, and they attribute the increase to crypto miners.
As a result, if cryptocurrency prices fall and crypto miners stop purchasing Nvidia's gaming cards, Nvidia's overall gaming revenue will most likely fall. And, given that Nvidia's gaming revenue in the third quarter was $2.94 billion, out of a total Q3 revenue of $7.1 billion, such a drop would be significant for NVDA stock.
Meanwhile, even if cryptos do not fall, Nvidia's sales from cryptocurrency miners may be on the decline. This is due to a number of factors, including the possibility of a mining ban in Russia and Intel's (INTC) entry into the gaming card market this quarter. Furthermore, the Seeking Alpha contributor believes that Ethereum's impending shift to a proof-of-stake model will significantly reduce demand for Nvidia's gaming cards.
Nvidia's revenue from cryptocurrency miners appears set to fall, lowering the company's top and bottom lines significantly. Investors will most likely be able to purchase the shares at a much lower price at that point, so it makes sense to hold off on purchasing the shares for a little longer.
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