Major Crypto Sell-Off Wipes Billions from Market Value
The cryptocurrency market has experienced a dramatic downturn over the past six weeks, with more than $1 trillion (£760 billion) evaporating from its total value. This severe correction comes amid growing concerns about a potential technology bubble and shifting expectations regarding US interest rate cuts.
According to data from CoinGecko, which tracks over 18,500 different coins, the entire crypto market has fallen by a quarter since reaching a peak in early October. The flagship cryptocurrency, Bitcoin, has been particularly hard hit, dropping 27% over the same period to reach $91,212 - its lowest price point since April.
Global Markets React to AI Bubble Concerns
The turbulence in cryptocurrency markets coincides with increasing nervousness across global financial markets. The UK's premier FTSE 100 index fell by 1.2% on Tuesday, marking its fourth consecutive day of losses. European markets followed suit, with the Stoxx Europe 600 index also declining by 1.2%.
Asian markets experienced even steeper declines, with Japan's Nikkei 225 index shedding 3.2% and Hong Kong's Hang Seng index dropping 1.7%. The widespread sell-off reflects mounting anxiety among investors about potential overvaluation in technology stocks, particularly within the artificial intelligence sector.
Adding weight to these concerns, Sundar Pichai, the chief executive of Google's parent company Alphabet, acknowledged in a BBC interview that there is currently "irrationality" in the AI boom. He issued a stark warning that "no company is going to be immune" if the AI bubble were to burst.
Industry Leaders Sound Alarm on AI Investment
The sentiment was echoed by Sebastian Siemiatkowski, CEO of the financial firm Klarna, who expressed particular concern about the enormous sums being directed toward computing infrastructure for AI development. "I'm very nervous about the size of these investments in these datacentres," Siemiatkowski told the Financial Times.
He specifically highlighted the soaring valuation of AI-related companies, including chipmaker Nvidia, which became the first company to achieve a $4 trillion market valuation this year before being joined by Apple and Microsoft. Siemiatkowski cautioned that these valuations affect ordinary investors through pension funds and index funds that automatically allocate capital to trending sectors.
A survey by Bank of America underscores these concerns, revealing that 45% of fund managers now view an AI bubble as the most significant tail risk facing stock markets.
Meanwhile, traditional safe-haven assets like gold have also seen prices decline, with the spot price falling 0.3% to $4,033.29 an ounce. This movement reflects fading expectations that the US Federal Reserve will cut interest rates next month, as higher rates diminish the appeal of non-yielding assets like gold.
Despite the current downturn, Giovanni Staunovo, an analyst at Swiss investment bank UBS, anticipates that gold prices will soon recover, stating: "I would expect gold prices to bottom out soon, as I still see the Fed cutting rates several times over the coming quarters, and central banks' diversification into gold remains strong."
