- Bitcoin price has plunged in the past few months.
- This retreat is happening because of the ongoing AI boom.
- The AI bubble may need to burst for the coin to recover.
The relentless Bitcoin price crash continued this week, reaching its lowest level since April, targeting the year-to-date low of $60,000. It has entered a local bear market after falling 20% from its May high. It is down by over 47% from its all-time high, and investors are wondering whether it will ever recover.
How the AI Bubble is Affecting the Bitcoin Price
The main reason the Bitcoin price has crashed over the past few months is that the ongoing AI boom has fundamentally reshaped the market. With all attention being in the AI industry, many investors have started to shift their focus and ride the momentum. Besides, Bitcoin has underperformed the broader market in the past few years.
The best way to look at this is the exchange-traded fund (ETF) market. Data show that spot Bitcoin ETFs have seen redemptions totaling over $3 billion in the past few weeks. Spot Ethereum ETFs have also had substantial outflows this year.
In contrast, investors have piled their cash into the stock market, where many AI companies are soaring. For example, a company like Dell has jumped by over 40% in the past few days. Marvell Technology stock has jumped over 40% this week after Jensen Huang predicted it would be the next $1 trillion company.
READ MORE: BitMine Stock Crashes Below Key Support as Tom Lee’s Case for Ethereum Implodes
Sandisk stock has jumped by over 4,000% in the last 12 months, while Micron, Samsung, and SK Hynix have entered the $1 trillion club. As a result, the DRAM ETF has attracted over $10 billion in inflows in the past two months. Also, the VOO ETF has accumulated over $1 trillion in assets.
As such, investors are largely moving towards these assets and space stocks amid the AI boom. They are ignoring and selling Bitcoin, which currently lacks a clear catalyst. This also explains why the gold price continues falling.
Bitcoin Price Recovery Depends on AI Bubble
With these dynamics, the Bitcoin price is likely to continue falling in the near term as investors ride the AI trade. Besides, the trade faces several major catalysts, including the upcoming IPOs of Anthropic and OpenAI. This means that Bitcoin may crash to $50,000.
A closer look at history shows that the bull run in the AI industry will end at some time. This will not necessarily mean a bubble bursting. Rather, it will be a reversal as investors book profits after the recent rally.
These plunges have occurred in other industries before. For example, cannabis stocks surged a few years ago as investors predicted a boom. Today, most of them are down by double digits. Similarly, most EV stocks, such as Rivian and Lucid, surged a few years ago and have since retreated.
Therefore, if the “AI bubble bursts”, we will likely see a rotation towards Bitcoin, gold, and other assets that are currently lagging.
READ MORE: MoneyGram Launches MGUSD Stablecoin on Stellar Network
