Over $1 trillion (£760 billion) has been erased from the crypto market’s valuation in the last six weeks as concerns about a tech bubble grow and hopes for a US interest rate reduction next month diminish.
According to data company CoinGecko, the value of the cryptocurrency market, which tracks over 18,500 coins, has dropped by a quarter since peaking in early October.
Bitcoin has experienced a 27% decline during this time, reaching $91,212, marking its lowest point since April.
Rising worries about an artificial intelligence bubble in the stock market are causing unease among global investors, with even the CEO of Google’s parent company cautioning that “no company will be immune” if the bubble bursts.
The FTSE 100 index in Britain fell by 1.3% on Tuesday, marking its fourth consecutive decline and its most severe day since April. The Stoxx Europe 600, which monitors the continent’s largest companies, declined by 1.8%. Wall Street also faced losses, with the Dow Jones, Nasdaq, and S&P 500 all down approximately 1% on Tuesday.
This was followed by a significant drop in Asia, with Japan’s Nikkei Stock Average falling by 3.2% and Hong Kong’s Hang Seng Index decreasing by 1.7%.
Sundar Pichai, the CEO of Google’s parent firm Alphabet, remarked in an interview with the BBC that there is a sense of “irrationality” surrounding the current AI boom. He cautioned that if the AI bubble were to burst, “no company, including us, will be exempt.”
Meanwhile, JPMorgan Chase Vice Chairman Daniel Pinto stated that the skyrocketing valuations of AI necessitate a reassessment. “There will likely be a correction,” he mentioned at the Bloomberg Africa Business Summit in Johannesburg on Tuesday. “This adjustment will also impact the rest of the sector, the S&P, and the industry.”
Klarna CEO Sebastian Siemiatkowski expressed concerns this week about the vast sums of money being invested in computing infrastructure.
He told the Financial Times: “[OpenAI] has the potential to be highly successful as a company, but I’m apprehensive about the extent of these data center investments, which is my primary concern.”
The Klarna co-founder highlighted the increasing valuations of AI companies, including Nvidia, as a troubling issue. Nvidia became the first firm to achieve a market valuation of $4 trillion this year, followed by Apple and Microsoft.
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“That concerns me, considering the amount of wealth currently being blindly allocated to this trend without deeper thought,” Siemiatkowski remarked.
“You might say, ‘I don’t believe NVIDIA is worth this much, but it doesn’t matter. Some wealthy individuals will lose money.’ However, the reality is that due to index funds and their mechanisms, one might assume their pension is a sound investment.”
AI bubbles are viewed as one of the most significant risks to the stock market, with research from Bank of America indicating that 45% of fund managers surveyed consider AI bubbles to be the paramount risk. tail risk.
Gold, typically regarded as a safe-haven asset, has also seen a decline. Spot prices dropped by 0.3% on Tuesday morning to $4,033.29 an ounce, following a one-week low.
This drop occurs as expectations around a US Federal Reserve (Fed) interest rate reduction next month wane. Higher interest rates make gold less appealing due to its non-increasing yield.
Nonetheless, Giovanni Staunovo, an analyst at Swiss investment bank UBS, mentioned that while gold prices may fall further, he anticipates a rebound soon.
“With the Fed projected to lower interest rates multiple times in the coming quarters and the strong trend of central banks diversifying into gold, we predict that gold prices will stabilize soon,” he stated.
Source: www.theguardian.com
