Bitcoin slips below $80,000 as AI concerns and Fed caution hit crypto

Bitcoin dipped below $80,000 on Monday as investor caution grew ahead of a Federal Reserve meeting. Worries over heavy artificial intelligence (AI) spending, rising oil prices, and global market uncertainty contributed to the downward pressure on cryptocurrencies. Although Bitcoin, the world's largest digital currency, initially fell as much as 1.4% to below $79,300 before recovering some losses, it later traded around $80,000 during Asian trading hours.

By early Monday morning in Eastern Time, Bitcoin was down 0.4% to $80,227.70. Over the weekend, Bitcoin lost around $2,000 as investor confidence remained weak, causing most major digital tokens to also record losses. US-listed spot Bitcoin exchange-traded funds (ETFs) saw $772.4 million in withdrawals on Thursday and Friday, a sharp contrast to the previous week's $1 billion in net inflows, indicating a shift in investor demand for Bitcoin investment products.

Concerns about AI spending and oil prices have affected technology stocks and other risky investments, including cryptocurrencies. Investors are closely monitoring the Federal Reserve meeting and upcoming US midterm elections for clues on whether heavy AI spending will yield positive results. Meanwhile, the tech sector faced further declines in Asia, with South Korea's Kospi Index falling 0.2% and Japan's Nikkei Index seeing significant drops in chip-related stocks.

Caroline Mauron, co-founder of Orbit Markets, noted that Bitcoin had remained relatively strong amidst AI-related debt concerns, but now investors are focusing on the Federal Reserve meeting and US elections. Pratik Kala, portfolio manager at Apollo Crypto, added that Bitcoin is part of the risk-off category for many systematic funds and algorithmic traders, meaning that when market sentiment weakens, investors may reduce their exposure to Bitcoin, further putting pressure on its price.

Kala also pointed to recent discussions surrounding AI, including comments by SpaceX and Tesla CEO Elon Musk, as contributing to market uncertainty. Additionally, progress in AI has raised concerns about potential security risks for the cryptocurrency industry, making some investors more cautious about digital assets. Oil prices fell on Monday after news of further Middle Eastern-Iran talks aimed to ease tensions, but prices remained close to their annual highs, keeping investors worried about possible impacts on the global economy.

The Federal Reserve, European Central Bank (ECB), and Bank of Japan (BOJ) are all set to meet this week, with markets expecting them to leave interest rates unchanged. However, investors are closely watching for any signals about future policy decisions. Higher interest rates generally make risky investments, such as cryptocurrencies, less appealing, potentially putting additional pressure on prices.

Bitcoin has been trading near the bottom of a $80,000 to $87,000 range established over the past month, and the lack of positive developments has made it difficult for prices to recover. The seasonal trend, known as “Uptober,” which historically sees cryptocurrency prices rise in October, has failed to materialize for the second consecutive year, adding to the sector's pressure.

While most cryptocurrencies declined on Monday, Dogecoin rose 0.4%, and the $TRUMP token fell 0.6%, showcasing mixed performance among memecoins as investors remained cautious.