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A combination of global economic concerns and speculation surrounding a potential bubble in the artificial intelligence (AI) sector is sending bitcoin into a tailspin and destroying investor confidence. The decline that Bitcoin experienced yesterday, September 30, is only a symptom of a deeper malaise affecting the entire crypto market. Between fears of a global recession and speculation about tech bubbles, investors are watching every move with trepidation.
Macroeconomic tensions weigh on Bitcoin
On September 30, 2024, Bitcoin plunged 4.1% to $63,500, erasing the gains of the previous five days. This decline is mainly attributed to global economic uncertainty and negative macroeconomic data in the United States.
The US stock market is currently showing signs of weakness, with key sectors such as manufacturing and services underperforming significantly. That weakness is increasingly being felt as investors await comments from Federal Reserve Chairman Jerome Powell on the economic outlook, which is scheduled for Friday, October 4, 2024. Services and manufacturing indexes, usually barometers of the economic health of the United States, are showing a slowdown that worries many market participants.
In addition, economic forecasts are also affected by the labor market, which could exacerbate these concerns. A weakening labor market could actually heighten fears of a recession, as a decline in the sector would mean a reduction in consumption, a key driver of economic growth.
The European markets are not left out either. Germany, the engine of the European economy, thus faces negative growth prospects for 2024. At the same time, geopolitical tensions in the Middle East with ongoing conflicts in this part of the world contribute to this uncertainty.
AI bubble and escape to safe harbor
Another factor behind this Bitcoin decline is the fear of a bubble in the AI sector. While AI has been a driver of innovation in recent years, some observers worry that the excitement surrounding the technology is overstated. It’s not really about the technology, but rather the way it’s used. As a result, the operating costs of language models like ChatGPT have fallen drastically, while companies continue to charge inflated subscriptions. Users will eventually realize this, leading to lower prices and lower returns, with a crisis of confidence similar to that of the dot-coms in 2000.
In this climate of uncertainty, investors are fleeing risky assets such as cryptocurrencies in favor of safe assets such as government bonds and cash. The inability of central banks to cut interest rates due to rising inflation makes the situation worse. For many, the volatility of cryptocurrencies is too risky in such an unstable environment. However, Bitcoin could ultimately benefit from this crisis as an alternative store of value.
Bitcoin’s fall reflects heightened concerns that combine economic uncertainty and technology speculation. Although these events have led to a short-term loss of confidence in cryptocurrencies, the longer-term outlook remains uncertain. If the AI bubble bursts and a global recession is confirmed, Bitcoin could either become a safe haven for investors or suffer more serious turbulence.
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A graduate of Sciences Po Toulouse and holder of the blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I made a commitment to raise awareness and inform the general public about this ever-evolving ecosystem. My goal is to enable everyone to better understand blockchain and take advantage of the opportunities it offers. Every day I try to provide an objective analysis of current events, decipher market trends, convey the latest technological innovations and put into perspective the economic and social problems of this ongoing revolution.
DISCLAIMER OF LIABILITY
The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.