Crypto market sheds more than $1tn in six weeks amid fears of tech bubble

Background

Battered by the dual impact of spreading fears over an "AI tech bubble" and fading expectations for a U.S. Federal Reserve "rate cut," global financial markets are experiencing a severe asset sell-off. In just the past six weeks, the cryptocurrency market has been hit hard, with over $1 trillion (approx. £760 billion) in market capitalization evaporating—a shrinkage of one-quarter overall. Simultaneously, the price of Bitcoin plunged 27% to $91,212, hitting its lowest level since April of this year. This decline is not an isolated event but is occurring in sync with a broad correction in global stock markets, indicating that investors are rushing to exit various high-risk assets.

Commentary

In the stock markets, selling pressure has spanned Europe, the Americas, and Asia. The UK's FTSE 100 index fell for four consecutive days, Europe's Stoxx 600 dropped 1.8%, and Wall Street's three major indices (Dow Jones, Nasdaq, and S&P 500) all fell by approximately 1%. Asian markets were hit particularly hard, with the Nikkei 225 plummeting 3.2% in a single day and Hong Kong's Hang Seng Index dropping 1.7%. The core reason for this freezing market sentiment stems from rare warnings issued by several heavyweight industry leaders regarding the AI boom. Sundar Pichai, CEO of Google's parent company Alphabet, bluntly stated that the current AI boom contains obvious elements of "irrationality," sternly warning that if the bubble bursts, "no company is going to be immune," not even Google itself. Daniel Pinto, Vice Chairman of JPMorgan Chase, also noted that valuations in the AI sector are excessive and a correction is inevitable, which will subsequently impact the broader S&P index.

Klarna CEO Sebastian Siemiatkowski highlighted deeper structural risks. He is not only nervous about the high valuations of tech giants like Nvidia (whose market cap once breached $4 trillion) and Apple but is even more concerned about the massive sums being blindly poured into hardware infrastructure, such as data centers. He specifically emphasized an often-overlooked crisis: through the automated allocation mechanisms of index funds, the general public's "pensions" are unknowingly heavily exposed to this potentially overheating trend, lacking thoughtful risk management. According to the latest survey by Bank of America, 45% of surveyed fund managers now view the "AI bubble" as the biggest "tail risk" in the current market.

Furthermore, the macroeconomic environment remains pessimistic. As market expectations for a Fed rate cut next month have significantly diminished, the high-interest-rate environment continues to suppress the appeal of non-yielding assets, leading to a sell-off in gold—a traditional safe-haven asset—with prices falling 0.3% to $4,033 per ounce. However, UBS analyst Giovanni Staunovo offered a relatively optimistic view, believing that as central banks continue to purchase gold to diversify risk, and with the Fed still having room to cut rates over the coming quarters, gold prices are expected to rebound after bottoming out soon.