More than $1 trillion (£760 billion) has been wiped off the value of the cryptocurrency market over the past six weeks, driven by fears of a tech bubble and dwindling expectations of a US rate cut next month.
Tracking more than 18,500 coins, the crypto market’s value has fallen by a quarter since its peak in early October, according to data firm CoinGecko.
Bitcoin fell 27% over the same period to $91,212, its lowest level since April.
Investors around the world are worried as fears grow over an artificial intelligence bubble in the stock market, with even the boss of Google’s parent company warning that “no company” will be safe if the bubble bursts.
Britain’s blue-chip FTSE 100 index fell 1.3% on Tuesday, its fourth consecutive day in the red and the worst day since April. The Stoxx Europe 600 index, which tracks the continent’s largest companies, fell 1.8%. Wall Street was also trading lower, with the Dow, Nasdaq and S&P 500 all down about 1% on Tuesday.
This decline follows more pronounced declines in Asia, where in Japan the Nikkei 225 index lost 3.2%. Hong Kong’s Hang Seng Index fell 1.7%.
Sundar Pichai, director of Google’s parent company Alphabet, said in a BBC interview that there was “irrationality” in the current AI boom. He warned that if the AI bubble burst, “no company would be safe, including us.”
Meanwhile, JP Morgan Chase Vice Chairman Daniel Pinto said AI’s booming valuations need to be reassessed. “There is probably a correction here,” he said Tuesday at the Bloomberg Africa Business Summit in Johannesburg. “This correction will also create a correction in the rest of the segment, the S&P and the industry.”
Klarna chief executive Sebastian Siemiatkowski also sounded the alarm this week, warning that the huge sums invested in IT infrastructure were making him “nervous”.
He told the Financial Times: “I think OpenAI can be very successful as a company, but at the same time I’m very nervous about the scale of these investments in these data centers. That’s what particularly concerns me.”
The Klarna co-founder added that the rising valuation of AI companies, including chipmaker Nvidia, was also a cause for concern. Nvidia became the first company to reach a market value of $4 trillion this year, later followed by Apple and Microsoft.
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“It makes me nervous, because of the amount of wealth that is currently being automatically allocated to this trend, without further thought,” Siemiatkowski said.
“You can say, ‘I don’t agree that Nvidia is worth that much and I don’t care, some rich people are going to lose money.’ But the truth is that because of index funds and the way they work, your pension is currently considered a good investment.
An AI bubble is now considered one of the most serious risks in the stock market, and a survey by Bank of America found that 45% of fund managers surveyed believe it is the most important tail risk.
The price of gold, traditionally considered a safe haven, is also falling. The spot price fell 0.3% to $4,033.29 an ounce Tuesday morning, after hitting its lowest level in a week.
The drop comes as expectations fade that the U.S. Federal Reserve will cut interest rates next month. Higher interest rates make gold relatively less attractive, as the metal does not earn a return.
However, Giovanni Staunovo, an analyst at Swiss investment bank UBS, said the gold price was likely to fall further but would recover soon.
“I would expect gold prices to bottom out soon, as I still see the Fed cutting rates several times over the next few quarters, and central bank diversification into gold remains strong,” he said.
