Bitcoin has lost more than 16% of its value over the past month while the S&P 500 hit all-time highs, as capital rotates out of crypto and into artificial intelligence stocks. Analysts say the outflow is driven by a momentum trade that has shifted decisively toward AI infrastructure, robotics, and anticipated IPOs like SpaceX and OpenAI.
Charles Schwab’s director of digital currencies research, Jim Ferraioli, summed up the pressure: “Bitcoin has been in a bear market since October. Momentum is out of crypto at the moment.” Spot bitcoin ETFs shed 62,794 BTC over three weeks, marking the second-largest outflow streak on record. A $1.26 billion block sale of BlackRock’s IBIT ETF on May 26 indicated a large investor seeking a rapid exit, not a hedge fund strategy unwind. Total crypto market cap has fallen to $2.38 trillion, down 46% from its October peak.
Bitwise CIO Matt Hougan noted the stiff competition from AI: “AI stocks, robotics companies, SpaceX… who needs crypto when the Nasdaq-100 is up 43% year-over-year?” K33 Research warned that leveraged long positions are building even as prices slide, flagging possible deeper lows.
Meanwhile, Bridgewater Associates founder Ray Dalio injected a note of caution about the AI frenzy itself. He warned that the AI investment bubble could burst not from technological failure but when investors need actual cash. “Bubbles often end when holders of valuable assets are forced to convert paper gains into spendable money,” Dalio said in a Bloomberg interview. He estimated that Alphabet, Amazon, Meta, and Microsoft could spend $650 billion on AI infrastructure in 2026, far above 2025 levels, creating a fragile setup where paper wealth outruns money supply.
Dalio linked the risk to debt pressure, tax debates, fund redemptions, and potential disruption to Taiwan’s chip exports. His bubble indicators, he said, are near levels seen before the 2000 dot-com crash and 1929 market collapse. Notably, Dalio still prefers bitcoin—which he calls digital gold—over cash, suggesting the cryptocurrency could benefit if the AI bubble bursts and investors seek hard assets.
