Bitcoin risks pressure from AI sell-off as K33 highlights Anthropic IPO

• Closer correlation with AI stocks and the forthcoming FOMC decision could deepen the pressure on Bitcoin’s price.
• A planned $100 billion IPO fundraising by Anthropic could fuel concerns that investors will sell Bitcoin to finance their stakes.
• With leverage accumulating ahead of major market catalysts, K33 cautions that Bitcoin’s historically subdued volatility increases the risk of abrupt price moves.

An increasingly close correlation between Bitcoin (BTC) and the equity market sell-off leaves risk assets vulnerable to steeper losses as inflation worries and leverage in technology shares intensify, according to Wintermute.

Bitcoin risks steeper losses as AI stocks weaken

A closer correlation with artificial intelligence (AI) shares could leave Bitcoin more exposed to a wider market decline, the trading firm cautioned in its Tuesday market report.

As household wealth, leverage and institutional investment flows become more closely tied to technology shares, equity market conditions have become crucial to Bitcoin’s direction, the firm argued.

Wintermute wrote: "BTC rose with the AI rebound on Wednesday and fell with the chip selloff on Thursday, so it’s clear that BTC is following a wider macro closely,"

Retail investment, the equity wealth effect and ETF flows are increasingly important to further gains in Bitcoin, the market maker added. That dependence leaves the cryptocurrency vulnerable to changes in wider market sentiment.

Bitcoin awaits FOMC decision and inflation figures

Wednesday’s Federal Open Market Committee (FOMC) decision, followed by Thursday’s personal consumption expenditures (PCE) inflation report, will provide immediate catalysts for Bitcoin and other risk assets, the report said.

Markets assign a 92.8% probability to the Fed keeping rates unchanged, according to the CME FedWatch tool. Wintermute noted, however, that the key question is whether policymakers flag a possible December rate increase, with oil prices above $100 heightening inflation risks.

If the statement reinforces expectations of a December increase, yields could rise and Bitcoin’s $80,000 support could come under fresh pressure. Keeping the December decision open, by contrast, could give prices scope to recover towards $82,500.

Should a dovish hold precede stronger-than-expected PCE inflation, an AI stock-led sell-off could follow and deepen losses across cryptocurrency markets, Wintermute cautioned.

Until the FOMC decision has passed without significant surprises and Bitcoin has regained $82,500, the firm says its outlook remains cautious.

Anthropic IPO and US midterms compound Bitcoin uncertainty

Alongside the Fed’s rate decision, the November 3 US midterm elections and Anthropic’s proposed initial public offering (IPO) present further uncertainty for Bitcoin, according to K33 analysts. Writing in a Tuesday report, K33’s Head of Research, Vetle Lunde, said the vote could shape the outlook for crypto regulation, while doubts over the result may dampen market sentiment.

Lunde wrote: “Either outcome should impact BTC directionally, but the uncertainty itself may be enough to soften BTC performance,”

Investors could also sell Bitcoin to fund participation in Anthropic’s anticipated $100 billion IPO, K33 warned. As a potential precedent, the firm cited the SpaceX IPO, which raised $75 billion. Over the 23 days separating SpaceX’s registration statement from its IPO, Bitcoin dropped from $77,000 to $63,000 and Bitcoin ETPs saw sizeable outflows.

Irrespective of those events, exceptionally quiet trading could precede a sharp rise in volatility, K33 cautioned. Bitcoin’s 30-day price volatility had reached the second percentile of observations recorded during the 2020s. At 1.3%, volatility in perpetual futures open interest was also among its lowest readings since June 2021.

Extended periods of calm let leverage accumulate gradually, the firm argued. A subsequent price move can force traders to unwind positions, potentially magnifying market fluctuations.

At the time of writing, BTC stands at $80,670 following a 1% gain over the past 24 hours.