Bitcoin weathered the recent market turmoil better than global equities, which were shaken by concerns that investment in artificial intelligence has run ahead of returns. Shares of AI-related companies slumped as doubts grew over whether massive data center spending will translate into actual profits, but bitcoin rebounded quickly after dipping below $80,000. Some analysts say the cryptocurrency could benefit over the long run regardless of which way the AI industry turns.
Bitcoin traded at $81,943 as of 7:24 p.m. on the 16th, up 1.28% from 24 hours earlier, according to CoinMarketCap, a global cryptocurrency market data site. The token slid to as low as $79,800 during trading on the 15th but recovered to around $82,500 within about two hours. It has moved sideways since. Bitcoin faced selling pressure alongside AI-related stocks but pared its losses quickly as bargain hunters stepped in.
In U.S. markets, AI infrastructure companies led the declines. The Nasdaq Composite fell 1.88% on the 14th and the Standard & Poor's 500 lost 1.11%. CoreWeave, which operates AI data centers, dropped about 15%, and Oracle fell about 9%. Dell Technologies, which makes AI servers, slid more than 11%. The Philadelphia Semiconductor Index declined 4.3%.
The shock from the U.S. spread to South Korean chip stocks. The KOSPI closed at 5,554.22 on the 15th, down 7.57% from the previous session. Samsung Electronics (005930.KS) fell 9.48% and SK hynix (000660.KS) dropped 11.06%. Bitcoin's decline was relatively contained compared with the steep losses in AI-related shares in both the U.S. and South Korea.
What rattled AI stocks was concern over the scale of the required investment. Running AI services requires not only high-performance chips but also large data centers and power infrastructure. Companies are expanding spending in anticipation of future demand, but doubts are mounting over whether their earnings will be enough to recoup the outlays. Worries about rising U.S. inflation and the prospect of higher interest rates have further highlighted the funding burden on companies that took on debt to expand.
One reason bitcoin limited its losses is the concentration of buying demand near $80,000. According to a report released on the 14th by blockchain analytics firm Glassnode, bid orders to buy bitcoin around $80,000 were the largest cluster on Binance, the global cryptocurrency exchange. The estimated average cost basis for bitcoin held by U.S. spot bitcoin exchange-traded funds was about $81,500, close to that level.
Weaker selling pressure is also seen as having supported the price. Glassnode data showed that the volume of bitcoin sold by long-term holders realizing losses was down about 85% from its peak on Aug. 12. That means fewer investors are willing to absorb losses to exit positions even as prices fall. The buy orders near $80,000 and the drop in loss-taking sales may have absorbed some of the downward pressure during this correction.
Some analysts also argue that the direction of the AI industry could work in bitcoin's favor over the long term. Matt Hougan, chief investment officer at Bitwise, said in a report on the 14th that if an AI investment bubble bursts, bitcoin could initially fall along with other risk assets, but added that bitcoin could benefit if central banks cut policy rates and expand the money supply to counter a recession. Given the strategic importance of the AI industry to the U.S. economy, he said the government is also likely to step in with large-scale support.
Conversely, Hougan argued, bitcoin could also do well if the AI industry succeeds. His reasoning is that if AI boosts productivity and sharply increases the supply of goods and services, assets that cannot be easily replicated or produced would stand out in relative value. He cited gold and real estate, along with bitcoin, as leading examples of scarce assets. Even if the AI industry grows gradually without abrupt shifts, he said, inflows through ETFs and expanding investment by companies and institutions could support bitcoin's price.
Those are long-term scenarios, however. In the short term, analysts say bitcoin is trading much like technology stocks. Matt Simpson, a market analyst at global financial services firm StoneX, said in a report on the 15th that correlation coefficients between bitcoin and the Nasdaq, Nvidia and the Philadelphia Semiconductor Index all exceeded 0.9 over the past five trading sessions. That suggests bitcoin, having moved in step with tech stocks recently, remains exposed to swings in the equity market.
For the rebound to hold, fresh investment flows will be needed. U.S. spot bitcoin ETFs saw net outflows of $261.4 million on the 14th, according to flow data compiled by Farside Investors. The following day, the funds drew net inflows of $5.1 million, far short of the previous day's outflows. That means bargain hunting may cushion declines, but prices will struggle to sustain gains without sufficient new money.
U.S. interest rate policy is another variable. The producer price index for September rose 1.3% from the previous month, the U.S. Bureau of Labor Statistics said on the 15th, the largest increase since March 2022. The consumer price index for September, released a day earlier, rose 3.7% from a year earlier, beating market expectations. Persistent inflation increases the chances that the Federal Reserve will raise its benchmark rate further or hold it high for an extended period, which could weigh on bitcoin as well.
