Bitcoin crashed below the psychological $100,000 level for the first time in over four months Tuesday, dragging the entire crypto market down as investors dumped risk assets amid growing concerns about overvalued AI stocks. The flagship cryptocurrency hit a low of $99,966, marking its steepest decline since late June.
The crypto world's worst fears materialized Tuesday when Bitcoin shattered the $100,000 psychological barrier that had held since late June. The digital asset plunged 6% to trade at $100,870, briefly touching $99,966 - its lowest point in more than four months.
The carnage wasn't limited to Bitcoin. Ether, crypto's second-largest token, shed nearly 10% to hit $3,296 as the entire digital asset ecosystem crumbled under selling pressure. The synchronized decline highlights how intertwined crypto has become with traditional risk assets, particularly AI stocks that have been driving market euphoria.
The connection proved toxic Tuesday when the Nasdaq Composite dropped over 1%, dragging crypto down with it. Investors dumped shares of Palantir despite the data analytics company posting solid quarterly earnings, spooked by its sky-high valuation that's become emblematic of AI trade excess.
"Bitcoin and the broader crypto market is exhausted," Haonan Li, founder of Ethereum-based stablecoin platform Codex, told CNBC. "Even with stablecoin growth, rising real-world asset volumes, and Bitcoin increasingly behaving like an institutional store of value - the market doesn't care. Bad news is very bad for crypto right now, and good news barely moves the needle."
The timing couldn't be worse for crypto bulls who were counting on October's historically strong seasonality to propel prices higher. Instead, Bitcoin has trended downward for weeks, echoing the pattern from October 2018 - the last time seasonal tailwinds failed to materialize. That precedent is ominous: Bitcoin plunged 37% the following November.
Compass Point analyst Ed Engel warns the selloff may have further to run. "While selling from Long-term Holders is a common feature in bull markets, retail spot buyers have been less engaged than prior cycles," he noted. The absence of individual investors buying the dip removes a crucial support mechanism that's helped Bitcoin recover from past drawdowns.
The analyst sees potential support at $95,000, but admits "we don't see many near-term catalysts" that could reverse the decline. With long-term holders continuing to sell and short-term speculators potentially capitulating, Bitcoin faces a perfect storm of selling pressure.
The crypto market's correlation with AI stocks has become increasingly problematic as both sectors attract similar risk-seeking investors. When AI valuations come under scrutiny - as they did Tuesday with - crypto gets caught in the crossfire. This dynamic explains why Bitcoin's decline accelerated alongside tech stock weakness.
