More than $1 trillion (£760bn) has been wiped off the global cryptocurrency market over the past six weeks, as fears of a technology bubble and diminishing expectations for a US interest rate cut in December weigh on investor sentiment. The value of the crypto market has fallen by a quarter since its peak in early October, according to data from CoinGecko, which tracks over 18,500 coins.
Bitcoin, the largest cryptocurrency, has dropped 27% in the same period to $91,212, its lowest level since April. The sell-off comes amid growing concerns that artificial intelligence (AI) stocks may be overvalued, with even Sundar Pichai, chief executive of Google’s parent company Alphabet, warning that “no company” would be immune if the AI bubble bursts. Daniel Pinto, vice-chairman of JP Morgan Chase, also predicted a correction in AI valuations, which he said would spill over into the broader market.
The FTSE 100 fell 1.3% on Tuesday, its fourth consecutive decline and its worst day since April. European stocks also slid, with the Stoxx 600 down 1.8%, while Asian markets suffered steeper losses: Japan’s Nikkei 225 dropped 3.2% and Hong Kong’s Hang Seng lost 1.7%. On Wall Street, the Dow Jones, Nasdaq and S&P 500 all fell about 1%.
Klarna chief executive Sebastian Siemiatkowski added to the unease, telling the Financial Times that the vast sums pouring into AI data centres made him “nervous”, and that the soaring valuation of companies like Nvidia — which this year became the first to hit $4tn — was a concern. He noted that index funds and pensions were automatically allocating capital into AI, potentially exposing ordinary savers to a bubble.
Gold, traditionally a safe-haven asset, also fell 0.3% on Tuesday to $4,033.29 an ounce, as expectations faded that the US Federal Reserve would cut interest rates next month. Higher rates make gold less attractive because it pays no yield. However, Giovanni Staunovo, an analyst at UBS, said he expected gold prices to bottom out soon, with the Fed likely to cut rates several times in the coming quarters and central banks continuing to diversify into gold.
