Bitcoin declines as geopolitical tension adds to risk-off mood

BITCOIN extended a four-week slide as investors returned to a more cautious macro backdrop. The token dropped as much as 3.1 percent to $66,707 on Tuesday. Renewed selling of several tech giants weighed on stocks amid lingering anxiety over the outlook for artificial intelligence (AI). Bitcoin, which has traded like a high-beta tech proxy in recent months, mirrored the move lower.

Traders are weighing rising geopolitical tensions around Iran and renewed debate over whether AI’s economic impact could ripple beyond the tech sector. The outlook for Federal Reserve rate cuts is also back in focus after last week’s inflation data, according to Bloomberg, as reported by Yahoo Finance.

Flows remain a headwind. US-listed Bitcoin exchange-traded funds notched a fourth straight week of net outflows, with $360 million withdrawn last week.

Sentiment is fragile. CryptoQuant’s Fear and Greed Index stood at 10 out of 100 on Monday, deep in ‘extreme fear’ territory.

“Macro news has been closely correlated with crypto’s risk profile the last 12 months,” said Senior Director at market maker Wincent, Mr Paul Howard. He expects consolidation as Bitcoin searches for fresh sentiment drivers, adding that a US Supreme Court ruling on tariffs due Friday could prove more consequential than routine Fed minutes or inflation prints.

Investors are also debating whether Bitcoin has established a durable floor. Many see $60,000 as a key support level, but that may not hold if risk appetite deteriorates further, said Chief Executive Officer of crypto tax platform Koinly, Mr Robin Singh,

READ ALSO: Firm exits Bitcoin business after crash, moves into AI

“One macro wobble, another wave of uncertainty, or even just sustained chop in the mid-$60,000s could easily tip this into a sharper flush back into the $50,000s. This doesn’t have the same full capitulation feel we’ve seen at true cycle bottoms in the past,” Mr Singh said.

Bitcoin’s low

Bitcoin and several crypto assets have been on the low since the turn of the year. Bitcoin’s price has already crashed nearly 30 percent in the past month amid a crypto industry downturn that has wiped out $2 trillion in market value. Investors have dumped $678 million worth of Bitcoin exchange-traded funds so far in February, extending the $6 billion selloff since November, DefiLlama data shows.

Technology sector stocks, which Bitcoin price movements closely follow, are also falling on growing fears of severe disruption by AI technology, now commonly dubbed the ‘AI scare trade.’

BlackRock’s flagship tech ETF, which tracks industry leaders like Microsoft, Oracle, and Palantir, is down 23 percent year-to-date.

On February 1, Microsoft, the largest corporate shareholder of OpenAI, saw its value tank by $357 billion in the second-largest selloff for a single trading session in history.

“Technological innovations tend to be disruptive and dynamic,” said President of Yardeni Research, Mr Ed Yardeni. “That’s especially true with AI, which has the potential to disrupt itself.”

A prominent North American cryptocurrency mining company, Bitfarms Limited, announced it was exiting Bitcoin mining and rebranding itself as an AI and high-performance computing (HPC) infrastructure company.

According to The Street.com, the decision followed a strategic review and comes amid rising energy costs, declining Bitcoin mining profitability, and the recent cryptocurrency market downturn. Chief Executive Officer, Mr Ben Gagnon, described the move as a natural evolution for the company, stating, “We are no longer a Bitcoin company. We are an infrastructure-first owner and developer for HPC/AI data centers across North America. Our focus is building the infrastructure for the compute of the future.”

Warning

Bloomberg Intelligence strategist, Mr Mike McGlone, said on Monday that the cryptocurrency market bubble was ‘imploding.’ Bitcoin’s price, he said, was set to tumble another 85 percent to $10,000.

While traders might talk about a healthy correction, McGlone said the narrative around crypto was changing for a number of reasons.

“The buy-the-dip-mantra since 2008 may be over,” he wrote.