Bitcoin (BTC) followed the decline in risk markets, trading 6.5% lower after losing the key $100,000 support. The tech-heavy Nasdaq index fell 2.3% on Thursday. This move reflects growing US economic uncertainty, exacerbated by comments from Palantir CEO Alex Karp about AI profitability.
The sell-off in the tech market was severe. Shares like Palantir, Intel, and CoreWave fell 6% or more. Karp’s statements about AI costs raised doubts. Furthermore, BTC’s drop triggered $350 million in liquidations of leveraged bullish positions. However, analysts like PlanB dismiss that the selling is coming from Bitcoin insiders.
Are Tech Valuations and AI Hiding Cracks in the Economy?
Pessimism spread beyond the technology sector. Disney (DIS) shares plummeted 8% following weak quarterly results. This result adds to previous disappointments from consumer companies. For example, DoorDash and Starbucks also showed weakness. This suggests that overall consumer demand is weakening.
On the other hand, US economic uncertainty is intensifying. The recent 43-day government shutdown is delaying vital economic reports. RBC analysts warn about the difficulty of interpreting labor market data. Likewise, expectations regarding Federal Reserve policy have shifted. The odds of rate cuts have dropped sharply as inflation remains a concern.
Visibility for investors is currently reduced. It will take time to determine if market valuations are stretched and how the government will react. As long as the lack of reliable data persists, the cryptocurrency Bitcoin is likely to mirror the volatility of the broader markets. Recovery will depend on the economic clarity that is much needed.
