AI Frenzy Loses Steam, Bitcoin Less Volatile than Korean Stocks

We recently analyzed the impact of the AI fever on the cryptocurrency market and now see that it's starting to lose momentum. According to data from Bloomberg and Volmex, the implied volatility of South Korea's Kospi index has reached its highest annualized level at 81%, more than double bitcoin's implied volatility (BVIV) which stands at around 38%. This suggests that the demand for options or hedging contracts to protect against volatility risk in the Korean market is much greater than in the cryptocurrency market.

In the current scenario, many South Korean traders have been forced to close their investments, resulting in losses of over $2 billion in less than three months. This not only raises concerns about market stability but also serves as a reminder to other global markets experiencing a risk frenzy fueled by the AI fever.

For bitcoin enthusiasts, the reality that this cryptocurrency is now more stable than the Kospi index may be seen as a notable victory. However, bitcoin remains much more volatile and risky than the S&P 500 index, whose implied volatility (VIX) is below 20%. The question is whether the true victory for bitcoin supporters will be the day when VIX becomes more expensive than BVIV.

Meanwhile, the price of bitcoin remains under pressure from geopolitical news and is below its 50-day moving average, but there is a glimmer of optimism. According to analysis firm Nansen, the wallets that often move first and in larger size during geopolitical tensions have not significantly shifted towards stable cryptocurrencies.