AI Tokens Drop Amid Nvidia Put Option Activity

Tokens associated with artificial intelligence (AI) experienced a decline in value over the past 24 hours, underperforming the largest cryptocurrencies. This relative weakness coincided with unusual activity in put options tied to shares of Nvidia, the chipmaker that announced it would start building its AI supercomputers in the U.S.

While bitcoin (BTC), the largest cryptocurrency by market value, saw a 0.6% increase over 24 hours to $85,500, tokens such as TAO, the token of blockchain-based machine learning network Bittensor, traded 3.6% lower at $239. Similarly, the RNDR token of decentralized GPU rendering platform Render Network was down 1.7% at $3.93. Other tokens, including FET, SEI, and GRT, also lost 2%.

Nvidia's short-dated put options saw notable activity on Monday, with a concentration in the $100 strike put options expiring on April 17, April 25, and May 2. Additionally, there was activity in the $60 put expiring on April 17 and $50 and $85 strike puts expiring on May 16. This activity in out-of-the-money put options at strikes below Nvidia's spot price of $110 was deemed unusual. An analyst suggested that these could be protective plays, indicating a strategy to hedge against potential market declines.

Buying a put option is akin to purchasing insurance against market slides. Traders typically acquire these options when looking to profit from or hedge their spot bets against a potential market decline. The unusual activity in Nvidia's put options suggests that some traders may have insider knowledge or are anticipating a significant market event that could impact the company's stock price.