Key Points
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Stocks associated with the AI value chain are falling right now.
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Bitcoin’s price has held up comparatively better.
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The next patch of calm seas could see its price rise substantially.
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It’s been said that bull markets end when good news fails to boost prices, and that bear markets end when bad news fails to send prices lower. On that note, Bitcoin (CRYPTO: BTC) is 33.7% above its bear market lows in late June. Most of the high-flying artificial intelligence (AI) value-chain stocks, on the other hand — including Intel, Oracle, Micron Technology, and Sandisk — are down by between 20% and 62% in the same period.
There are plenty of good reasons for those stocks to be down. Yet aside from emerging factors like questionable future demand for some of the technologies those companies make, all of those players, as well as Bitcoin, have faced a constant onslaught of geopolitical and macroeconomic uncertainty this year. Their diverging prices amid those shared headwinds mean that one thing in particular could be coming next.
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
Bitcoin’s floor hasn’t collapsed yet
Bitcoin didn’t just start shrugging off bad news in the last couple of months. On Sept. 15, the Senate failed to advance the Clarity Act, a bill intended to set rules for crypto market structures. It briefly fell below $75,000 that day, then recovered within weeks.
Then, October saw the Nasdaq Composite index fall more than 5%, as big spenders on AI failed to wow the market with their earnings reports as well as their future projections. Bitcoin dropped 10.3% in the 30-day period ending on Nov. 5, but it largely traded in a range: every daily close was between $76,198 and $84,082, regardless of what was happening in the world. That resilience had to face down a handful of problems that also weighed on tech stocks.
For instance, on Oct. 28, the Federal Reserve voted to hold interest rates steady, and the very next day’s hot inflation data caused markets to expect a December hike. Rate hikes tend to be bad for risky assets like AI stocks and cryptocurrencies, as higher rates mean investors can earn a better return on low-risk Treasuries.
Before that, Brent crude oil prices climbed in October as the prospect of continued war with Iran contributed to a highly uncertain environment. Uncertainty tends to weigh on riskier assets, and rising energy costs drive inflation, which might prompt the Federal Reserve to hike interest rates further.
As if that wasn’t enough, hackers stole about $6.3 billion from Binance, the largest crypto exchange, on Oct. 29, in what was the largest crypto hack to date. Such hacks tend to make investors skittish about investing in digital currency, and for good reason.
U.S. spot Bitcoin exchange-traded funds saw $643.3 million in net outflows on Oct. 30. But even after, the token’s price didn’t do much. And even if investors are skittish about buying it, they don’t appear to be dumping their coins.
That suggests great things could be ahead for Bitcoin in the coming quarters.
How much bad news could be left?
Besides the above, Bitcoin is facing down at least a couple more problems right now. Congress will switch over from Republican control to Democratic control in 2027. Democrats are traditionally considered to be less favorable to crypto. Though that characterization isn’t entirely fair (historically, digital coins and other cryptocurrencies have performed well under both parties), it is still a factor influencing investor psychology and likely keeping at least some capital sidelined.
In the longer term, the coin is, in theory, vulnerable to its encryption being broken by quantum computers. Those computers might not exist until the early 2030s, but some investors, like Charles Edwards of Capriole Investments, argue that the unaddressed risk of a future quantum-enabled breach is already substantially depressing the coin’s price.
On paper, that’s a lot of reasons not to own Bitcoin. Yet people keep holding it and buying it for their crypto portfolios.
The bad news didn’t crater its price back to bear market lows. Nor is the credible threat of more bad news seriously damaging its price. Especially when viewed against the ongoing decline in AI stocks, this state of affairs suggests there’s a reasonable chance Bitcoin will climb once the headlines ease.
After all, it tends to be pretty good news for holders when an asset keeps refusing to make new lows despite bad news.
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Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Intel, Micron Technology, and Oracle. The Motley Fool has a disclosure policy.
