Bitcoin is getting hammered alongside AI stocks as investors dump risk assets on growing concerns about artificial intelligence valuations. The cryptocurrency fell 6% over two days to $103,952, with Ether down over 10% as the selloff spreads across digital assets. The correlation between crypto and tech stocks is becoming painfully clear for investors who thought Bitcoin had evolved into a safe haven.
The crypto carnage started with AI stocks, but it's spreading fast. Bitcoin tumbled to $103,952 Tuesday, down 2.5% on the day and 6% over 48 hours, as investors fled anything resembling a risk asset. Ethereum got hit even harder, dropping over 10% in two days to $3,503.
The selloff exposes an uncomfortable truth about Bitcoin's evolution - it's still dancing to the same rhythm as tech stocks, particularly AI plays. While crypto advocates have pushed the "digital gold" narrative hard, the reality is that Bitcoin shares many of the same institutional investors who've been pouring money into artificial intelligence stocks.
Palantir became the poster child for AI trade concerns Tuesday, getting slammed despite delivering solid earnings. The data analytics company's eye-watering valuation has investors questioning whether the entire AI sector has run too hot, too fast. Nasdaq futures dropped 1.5% as the tech-heavy index bore the brunt of the rotation.
"Bitcoin's supposed safe haven status is being tested," observes one crypto trader who's watched the correlation play out in real time. The cryptocurrency that was supposed to be uncorrelated with traditional assets is moving in lockstep with the very stocks it was meant to hedge against.
Compass Point analyst Ed Engel points to another troubling sign - retail investors aren't stepping in to buy the dip like they have in previous cycles. "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 in research Tuesday.
This retail hesitation could signal a fundamental shift in crypto market dynamics. Previous Bitcoin bull runs were fueled by waves of individual investors buying every dip, creating a floor under the price. If that buyer base is missing, the downside could be more severe than many expect.
The AI trade's fragility is also becoming apparent. After months of relentless gains driven by artificial intelligence hype, investors are starting to question valuations that seem disconnected from current revenue realities. Companies like Nvidia and Microsoft have seen their AI premiums compress as reality sets in.
