Bitcoin Drops Below $80,000 as Fed Policy Uncertainty, AI Spending Concerns and Rising Oil Prices Pressure Crypto Markets

Investors were growing cautious ahead of a crucial Federal Reserve meeting that Bitcoin dropped below $80,000 on Monday. Concerns over heavy spending on artificial intelligence (AI), rising oil prices and uncertainty in global markets also put pressure on cryptocurrencies.

The world's biggest cryptocurrency, Bitcoin, dipped as low as $79,299, but bounced back some of its losses. Then it traded between $80,000 and $81,000 in the afternoon trading hours in Asia, Bloomberg reported.

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Bitcoin price today and ETF outflows

Bitcoin was down 0.4% at $80,227.70 by 1:52 am Eastern Time (5:52 am GMT) on Monday. Over the weekend, the cryptocurrency had fallen by approximately $2000, with investors' confidence low. The downturn in Bitcoin has trickled down to the broader cryptocurrency sector, as the majority of major digital tokens fell on Monday. Other altcoins such as Ether, XRP, Solana also took a hit.

US-listed spot Bitcoin exchange-traded funds (ETFs) saw $772.4 million in withdrawals on Thursday and Friday. This marked a significant shift from the net inflow of over $1 billion that was observed earlier in the week, indicating a shift in investor appetite for Bitcoin investment products.

The crypto markets were hit by concerns about AI spending.Crypto markets felt the impact of AI spending concerns.

Technology firms are spending huge sums of money on AI, but investors are asking "how much is enough?Investors are all asking the question: enough. These concerns have been impacting the technology sector and other risky investments, such as cryptocurrencies. Meanwhile, investors are also waiting for upcoming quarterly earnings from major technology firms for any indications that the big investment in AI is the right strategy, Bloomberg reports.

The weakness in technology stocks continued in Asia on Monday. South Korea's Kospi Index, which is closely watched as an indicator of the AI trade, fell 0.2%. Overall, chip stocks were also among the worst performers in the Nikkei Index in Japan.

Despite other risky assets experiencing “a moment of doubt” due to debt driven by artificial intelligence technology, Bitcoin is still holding up well, according to Caroline Mauron, co-founder of Orbit Markets. Investors have now turned their attention to the Federal Reserve meeting, followed by the US midterm elections, however, she said.

Bitcoin continued to be a risk-off asset for systematic funds and algorithmic traders, according to portfolio manager at Apollo Crypto, Pratik Kala. When investor mood turns sour, these traders can start to cut their exposure to bitcoin further driving down the price, Bloomberg reports.

Kala also cited online conversations on AI, such as SpaceX and Tesla CEO Elon Musk's remarks about the prospect of consolidation in the field next year. Such talk adds to markets' uncertainty, Kala says.

The advancement of AI has also raised concerns about the potential security threats to the cryptocurrency industry.The development of AI has also brought up concerns regarding possible security threats to the cryptocurrency business. Some investors were becoming more cautious about digital assets due to these risks, said Kala.

Oil prices continue to send investors into a panic.Investors continue to fear oil prices.

Prices closed lower on Monday after further talks between Middle East nations and Iran seemed to have dampened fears. But the prices were near annual record levels, and they left investors nervous about the potential effects on the global economy, according to Investing.com.

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The Federal White House and the interest rate forecast.

This week the Fed, European Central Bank (ECB) and Bank of Japan (BOJ) all have policy meetings. While markets generally anticipate no interest rate move at the three central banks, investors are keen for clues regarding their policy decisions.

All three central banks are likely to take a wait and see stance given the persistent inflation and the added risk from energy prices. Their outlooks could leave the possibility of further interest rate hikes later this year open. Investing.com reports that, generally, higher rates make risky investments like cryptocurrencies less appealing, and may add additional downward pressure on prices.

Bitcoin is having trouble finding ground while other cryptocurrencies collapse.

Bitcoin has been consolidating in a $80,000 to $87,000 range for the past month. The lack of positive developments for the cryptocurrency market has made it difficult for prices to recover.

As expected, the so-called “Uptober” trend (whereby cryptocurrencies tend to increase in price during the month of October) has not materialised this October, either. Confidence in the sector on investor appetite has been further dampened by low sentiment of individual and institutional investors.

Ether, the world's second-largest cryptocurrency, was down 0.9% to $2,320.05 on Monday. The tokens of XRP, Solana, Cardano and BNB fell by 0.5%, 0.2%, 0.8% and 0.2%, respectively. The declines were part of a market-wide trend of weakness in the cryptocurrency market, Investing.com reported.

Some cryptocurrencies saw gains on Monday. Memecoins were mixed with Dogecoin up 0.4%, and the $TRUMP token down 0.6%, amid investor wariness.

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