The risks of an AI bubble and a recession threaten Bitcoin !

A combination of global economic fears and speculations around a potential bubble in the artificial intelligence (AI) sector is shaking Bitcoin, with investor confidence being destroyed. The drop that Bitcoin experienced yesterday, September 30, is just a symptom of a deeper malaise impacting the entire crypto market. Between fears of a global recession and technological bubble speculations, investors are scrutinizing every move with apprehension.

Macroeconomic tensions weigh on Bitcoin

On September 30, 2024, Bitcoin fell by 4.1 %, bringing its price down to $63,500, erasing gains from the previous five days. This drop is mainly attributed to global economic uncertainty and negative macroeconomic data in the United States.

The US stock market is currently showing signs of weakness, with a notable decline in performance in key sectors such as manufacturing and services. This weakness is increasingly felt as investors await comments from Federal Reserve Chairman Jerome Powell on the economic outlook, scheduled for Friday, October 4, 2024. The indices of services and manufacturing, usually barometers of the US economic health, are showing a slowdown, which worries many market players.

Moreover, the economic forecasts are also impacted by the job market, which could exacerbate these concerns. A weakening job market could indeed amplify recession fears, as a decline in this sector would mean a decrease in consumption, an essential factor for economic growth.

European markets are not immune. For instance, Germany, the engine of the European economy, is facing negative growth prospects for 2024. Concurrently, geopolitical tensions in the Middle East, with ongoing conflicts in this part of the world, add to this uncertainty.

The AI bubble and the flight to safe-haven assets

Another factor behind this Bitcoin drop is the fear of a bubble in the artificial intelligence sector. While AI has been a driver of innovation in recent years, some observers fear that the hype around this technology may be overvalued. It is not the technology itself that is at fault, but rather how it is being exploited. For instance, the operating costs of language models, such as ChatGPT, have dropped drastically, while companies continue to charge inflated subscriptions. Users will eventually realize this, leading to price drops and revenue decreases, with a confidence crisis similar to the dot-com bubble in the 2000s.

In this atmosphere of uncertainty, investors are fleeing risk assets, like cryptos, in favor of safe-haven assets such as government bonds and cash. The inability of central banks to cut interest rates due to rising inflation exacerbates the situation. For many, the volatility of cryptos is too risky in such an unstable environment. However, Bitcoin may ultimately benefit from this crisis as an alternative store of value.

The drop in Bitcoin reflects heightened fears, blending economic uncertainties and technological speculations. While these events have led to a short-term loss of confidence in cryptos, the long-term outlook remains uncertain. If the AI bubble bursts and a global recession confirms, Bitcoin could either become a safe-haven asset for investors or face more severe turbulences.