Bitcoin, the leading blue-chip cryptocurrency, plunged below the $100,000 mark. It was the first time in a little over four months since the Middle East crisis escalated from Israel in June. Experts said that as artificial intelligence (AI) tech stocks, which had been hitting a record high day after day, began to weaken, risk-off sentiment spread to assets like cryptocurrencies.
On the 4th (local time), Bitcoin finished trading at $99,306 on U.S. crypto exchange Coinbase, down about 7% from 24 hours earlier. During the session, it plunged to $96,794 on a Bloomberg basis, completely breaking the $100,000 level. It tumbled 21% from the all-time high of $126,210.5 set on the 6th of last month. At the same time, No. 2 by market cap, Ethereum, fell even more, plunging 12% to trade around the $3,100 level.
This drop is tied to the recent decline in AI tech stocks that had been rallying. Business outlet CNBC noted that as investor concerns grow over whether the AI-led market is sustainable, they are pulling back from risk assets like cryptocurrencies. It added the analysis that because crypto investors and tech-stock investors overlap to a large extent, Bitcoin shows a synchronization with the Nasdaq index. Aversion to risk assets overall appears to have started with the AI bubble debate and spread to the cryptocurrency market.
In the cryptocurrency market, outflows from spot Bitcoin and Ethereum exchange-traded funds (ETFs) since last month have been proving a cooling of investment demand. According to Yahoo Finance, Fundstrat's Sean Farrell, a strategist, said that selling by whales (large investors) in recent weeks has driven market weakness.
Concerns about a prolonged U.S. federal government shutdown (temporary work stoppage) also weighed as a negative factor. If the shutdown continues through December, there were concerns that expenditure from the U.S. Treasury General Account (TGA) would be blocked, tightening market liquidity.
Ed Engel, an analyst at Compass Point, warned, "Long-term holders are still selling," and said, "If short-term holders also move to sell more, the value could fall further." He said, "I see $95,000 as a support line, but there appears to be no catalyst to lift the value in the near term."