Crypto was hit by another wave of selling this morning.
The total market has dropped over 3% of its value over the past 24 hours and is now worth just over $3.7 trillion.
Tuesday’s market wipeout comes as spot Bitcoin exchange-traded funds have seen $1 billion in outflows over the past four days, according to SoSoValue, highlighting investors’ shaken confidence.
Now, analysts see more trouble on the horizon.
“Volatility is heating up across BTC and ETH as markets grapple with fears of a renewed US-China trade war and a bursting AI bubble,” Sean Dawson, head of research at Derive, said in a Tuesday blog.
Volatility data shows the market entering its most turbulent stretch since July, just as the artificial intelligence bubble bursts, Dawson said.
Traders are bracing for sustained long-term turbulence, as Bitcoin’s 90 and 180-day volatility have both risen from under 40% to 47%, while Ethereum’s has also lifted by about 10%, Dawson said.
This downturn reflects a “confluence of macro, technical, and structural factors,” David Siemer, CEO of Wave Digital Assets, told DL News.
“We’re also seeing forced liquidations across leveraged positions as prices sliced through key supports, and that cascade is aggravated by relatively thin order books in digital asset markets.”
Siemer added that miners, whales, and short-term holders are taking advantage of recent highs to offload exposure, which compounds downward pressure.
Artificial intelligence has driven the meteoric surge across stock markets. The promise the AI revolution has trickled down into crypto, with venture capitalists pouring over $2 billion into crypto projects supposedly leveraging AI in some way.
Yet, so far the promises of the new technology have fallen flat and now many are raising the alarm that the AI bubble is about to burst.
Another risk factor is the brewing trade war between Washington and Beijing after US President Donald Trump threatened to slam Chinese imports with a 100% tariff.
Those fears linger despite Trump offering a more conciliatory tone towards Beijing. On Friday, the US president said that the 100% duty was “not sustainable” in an interview with Fox News.
Trump now plans to meet Chinese President Xi Jinping in South Korea in two weeks to defuse tensions between Washington and Beijing.
“This is all just the ‘art of the deal and the‘TACO’ [Trump Always Chickens Out] trade remains alive and well,” David Brickell and Chris Mills, the analysts behind the London Crypto Club’s weekly Connecting the Dots newsletter, wrote on Sunday.