The crypto market faces risks: the tech bubble could impact digital assets

As global investors’ enthusiasm for artificial intelligence technology continues to grow, a potential threat is emerging — stock market bubble is forming and may trigger a chain reaction in the cryptocurrency market.

Signs of a technology sector bubble are evident

Data shows that search interest for the keyword “AI bubble” has reached a historic high in Germany. Google Trends scores have risen to the maximum of 100, reflecting widespread concern about overheating in the tech sector. Within just a few days, search volume has increased several times, strongly indicating that market anxiety has crossed professional investment circles and spread to the general public.

Warnings from financial industry professionals are even more serious. Apollo Group Chief Economist Thorsten Slock issued a warning in July that the current AI boom is even larger than the IT bubble of the 1990s. Especially the ten largest companies in the S&P 500 are valued far above historical levels.

The attitude shift among hedge fund managers is particularly noteworthy. According to a survey by U.S. Bank, 33% of hedge fund managers worldwide now list artificial intelligence as the biggest tail risk, even surpassing inflation and geopolitical conflicts. In comparison, last September this figure was only 10%, more than tripling in a short period.

Illusory prosperity of economic growth

Harvard economist Jason Furman pointed out that over 90% of US economic growth in the first half of the year came from investments in artificial intelligence and related IT technologies. Excluding this part, the US economy has virtually no growth. This data reveals the fragility of the current market boom.

Contradicting the massive investments is actual output. Although applications like ChatGPT have about 800 million weekly users, MIT research shows that 95% of companies cannot profit from generative AI investments. This huge gap between expectations and reality is a typical characteristic of a bubble.

Cryptocurrency market cannot remain unaffected

The correlation between tech stocks and digital assets cannot be ignored. Both markets benefit from optimistic sentiment about the future, loose financing environment, and growth-oriented capital inflows. Once enthusiasm in the AI field wanes, chain risks and re-evaluation are bound to affect the crypto ecosystem.

Market performance in mid-October clearly illustrates this correlation. After Trump announced tariffs on China, both the S&P 500 and Bitcoin declined simultaneously, with a correlation coefficient of 0.77, indicating that both are highly synchronized in response to macro shocks.

Market outlook: optimism and caution coexist

However, industry practitioners in crypto are not entirely pessimistic. According to the latest survey by BTC-ECHO and IU, 77% of cryptocurrency professionals are optimistic about the medium to long-term prospects of the industry. They emphasize that the influx of institutional investors, increased maturity of technological infrastructure, and deeper integration with the real economy all support long-term growth.

Nevertheless, risks do exist. If there is a significant correction in the AI sector, the overall market risk appetite may decline, putting short-term pressure on digital assets. Investors should remain vigilant and also recognize that the crypto market is gradually forming closer interactions with traditional financial markets.

Current BTC price: $90.69K, 24-hour change: -0.22%

Disclaimer: Cryptocurrencies are highly volatile, unregulated investment products. Your capital is at risk.