AI Fears Trigger Sharp Declines in Bitcoin and Nasdaq

Bitcoin has just erased its hard-earned gains after last week’s crash. The world’s leading cryptocurrency falls back towards $65,000, a collateral victim of a panic that hits the tech sector hard. Even precious metals are not spared. 

Tech drags bitcoin down

Bitcoin lost 2% on Wednesday, sliding towards $65,000 after briefly breathing above $70,000. Ether and Solana follow the same downward trajectory. This relapse does not happen by chance. It perfectly matches the movements of the Nasdaq, down 2%, and especially those of the software sector.

The iShares Expanded Tech-Software Sector ETF (IGV) plunged 3% on Wednesday. It now shows a decline of 21% since the beginning of the year. Investors question the high valuations of tech companies as artificial intelligence agents progress rapidly in programming. This revolution could disrupt the sector faster than expected.

“Software stocks are struggling again today,” notes Jim Bianco, a recognized macroeconomic strategist. 

IGV is essentially back to last week’s panic lows.

He adds a crucial point: “Don’t forget there’s another type of software, ‘programmable money,’ crypto, They are the same thing.“

This correlation is not new, but it reaches worrying heights. Bitcoin is behaving more and more like a risky tech asset and less like a decoupled store of value.

A contagion sparing no one

Panic has even hit traditional safe havens. Gold, long considered a safe-haven asset, gave up 3.1% to close at $4,938 an ounce. Silver suffered a real crash with a 10.3% drop to $75.08.

These brutal moves show that investors are massively liquidating their positions, regardless of asset class. They are seeking liquidity rather than protection. This situation resembles moments of extreme stress when all correlations converge to one.

However, some contradictory signals are emerging. Bitcoin ETFs recorded $167 million inflows over three days, after weeks of outflows. Ark Invest’s ARKB and Fidelity’s FBTC capture most of these flows. Some institutional investors are thus taking advantage of the downturn to position themselves.

The research company K33 even considers capitulation over after last week’s drop to $60,000. Bitcoin’s daily RSI plunged to 15.9, its sixth most extreme oversold level since 2015. Historically, such levels often precede significant rebounds.

Bitcoin stands at a crossroads. On one side, institutional fundamentals continue to strengthen with targeted ETF inflows. On the other, correlation with the tech sector exposes crypto to strong headwinds. As long as fears about AI’s impact on tech valuations persist, bitcoin will remain under pressure.