Bitcoin’s Plunge to $86,000: A Reflection of Big Tech’s Volatility and AI Bubble Fears
The tech-heavy Nasdaq index experienced a significant decline, falling 4% intraday on Thursday, despite strong earnings and forecasts from chipmaker Nvidia. This downturn was largely attributed to concerns about rising spending in the artificial intelligence (AI) space, which has sparked fears of a potential bubble. As a result, Bitcoin (BTC) followed suit, dropping below $86,000 for the first time since April, with its correlation with the Nasdaq reaching its highest level in months.
According to billionaire investor Ray Dalio, there is no clear trigger for an impending market crash, but he does express concerns about being in “bubble territory.” Dalio recommends diversifying into scarce assets like gold, citing his biggest fear as higher wealth taxes rather than tighter monetary policy. However, the release of a stronger-than-expected jobs report for September led traders to doubt the Federal Reserve’s likelihood of easing monetary policy further, causing market sentiment to shift.
Nonfarm payrolls rose by 119,000 in September, reversing the previous month’s decline. The minutes from the October Federal Open Market Committee (FOMC) meeting revealed that most participants noted that “further rate cuts could increase the risk that higher inflation becomes entrenched.” As a result, traders reduced the chances of two rate cuts by January 2026, reflecting renewed caution among stock and Bitcoin investors.
The Impact of AI Expansion on the Market
Despite strong corporate earnings, including a positive surprise from Walmart, retailers fear that the economy could weaken as AI developers like OpenAI continue to spend heavily. Gil Luria, head of technology research at DA Davidson, expressed concerns that companies are taking on significant debt to build data centers, which are “inherently speculative investments that could be billed in two or three years.” Luria noted that Nvidia’s profits are not a reliable indicator of whether the AI economy is truly mature.
The tech-heavy Nasdaq index has fallen 7.8% since its all-time high on Oct. 29, erasing gains from the past 10 weeks. Investors reacted by withdrawing from risk markets, causing Bitcoin’s price to plummet. The correlation between Bitcoin and the Nasdaq has risen to a six-month high of 80%, suggesting that investors are paying less attention to Bitcoin’s strengths in decentralization and predictable monetary policy.
Bitcoin’s Price Action and Market Sentiment
Below $90,000, Bitcoin traders are not necessarily bearish and are likely waiting for clearer entry points as the overall macroeconomic situation remains unstable. If Dalio is correct, panic sellers could end up regretting their exit as liquidity conditions could improve as the US household debt problem continues and US President Donald Trump pushes his “tariff dividend” proposal to boost the economy.
This article is for general information purposes and is not intended to constitute, and should not be construed as, legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.
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