Key Takeaways
Bitcoin is underperforming the S&P 500 by the widest margin in seven years as traders rotate capital into AI equities and away from digital assets.
Bitcoin fell as much as 3.1% to $65,391 on Tuesday, extending a selloff that has erased about $160 billion in market value this week and widened its divergence from record-setting technology shares. The Nasdaq 100 climbed to a record high, while the S&P 500 pushed higher, leaving Bitcoin trailing US equities by the largest margin since 2019.
"We have been rotating some capital from Bitcoin and digital assets into AI equities," Carney Mak, a partner at FXHB Asset Management, said. "AI currently offers a more compelling risk-reward profile relative to digital assets, which has led some investors to rebalance portions of their portfolios."
Over the past 12 months, the Nasdaq 100 has gained 41.5%, while Bitcoin is down 37% and sits 48% below last year's peak. Investors have pulled nearly $4 billion from US-listed Bitcoin exchange-traded funds over the past 12 sessions — a record streak of consecutive outflows, according to data compiled by Bloomberg. About $1.7 billion in leveraged crypto futures bets were liquidated in the past 24 hours, Coinglass data show, with most of the damage concentrated in bullish long positions.
The rotation has been fueled by massive capital raises in AI. Alphabet, the parent of Google, launched an $80 billion stock sale Monday, including $10 billion from Berkshire Hathaway, to fund investments in AI infrastructure. SpaceX is eyeing a $1.75 trillion valuation in its upcoming IPO, according to the Wall Street Journal. Crypto, by contrast, lacks a strong near-term catalyst, with performance increasingly range-bound and dependent on liquidity conditions, Mak said.
Strategy's 32-BTC Sale Rattles a Core Thesis
The selloff accelerated after Strategy Inc. disclosed the sale of 32 Bitcoin from its 843,706-coin hoard — a $2.5 million transaction against a holding valued at over $60 billion. While financially trivial, the sale punctured the market's belief in chairman Michael Saylor's long-standing "never sell" stance, said Rajiv Sawhney, head of international portfolio management at Wave Digital Assets.
"What it signals to the market, given Bitcoin's underperformance in recent weeks, matters more," Sawhney said.
Strategy's shares have fallen 14% this week and more than 70% from their peak. Leveraged and income funds tied to Strategy shares, including MSTU, MSTY and MSTX, could face amplified volatility if investors begin questioning the sustainability of the company's accumulation strategy, said Pratik Kala, a portfolio manager at Apollo Crypto.
AI Infrastructure Draws Capital From Crypto
The divergence extends beyond price. Nasdaq-listed K Wave Media last month abandoned plans to deploy roughly $500 million into Bitcoin, redirecting most of the capital toward AI data centers and GPU infrastructure. Crypto miner Bitdeer liquidated its entire Bitcoin treasury to fund expansion into AI and high-performance computing businesses.
Meanwhile, former Bitcoin miners that pivoted to AI infrastructure — including TerraWulf, Cipher Digital and Hut 8 — have all climbed to fresh one-year highs, with each stock surging roughly 700% over the past year. The AI infrastructure narrative has begun to decouple these companies from Bitcoin's price performance entirely.
Bitcoin traded near $67,000 on Wednesday, recovering about 0.7% but still down 9.5% over seven days. If Bitcoin tumbles below $60,000, it would probably trigger a wave of liquidations and a possible slide to as low as $54,000, a level of support dating back to both 2024 and 2021, according to market data. The Power Law Oscillator, a long-term valuation model, has fallen to 4.4%, indicating Bitcoin is priced cheaper than 95.6% of historical readings relative to trend — a level that has preceded rebounds after the March 2020 crash and the FTX collapse.
This article is for informational purposes only and does not constitute investment advice.
