AI's Allure Dims Bitcoin Faith as Investors Flee to Stock Markets

Bitcoin was supposed to be the future. A year ago, it seemed unstoppable—the price had climbed past $125,000, and the faithful spoke of it as though it were inevitable, a technology that would reshape finance itself. Charlie Munger, Warren Buffett's longtime partner, had long dismissed it as worthless, but even skeptics seemed to be losing ground. Then October arrived, and the ground gave way entirely.

Since that month, bitcoin has shed half its value. The fall was as swift as the rise had been dizzying. What makes the collapse particularly striking is not just the numbers—though they are severe—but the isolation. For years, bitcoin's fate had been tethered to the broader technology sector. When tech rose, bitcoin rose. When investors grew hungry for innovation, they bought both. This year, that correlation shattered. Bitcoin has fallen 30 percent while the Nasdaq 100 climbed 20 percent. The two have decoupled entirely, and bitcoin lost the race.

The hemorrhaging has been visible in the institutional markets. Bitcoin exchange-traded funds, which allow traditional investors to hold the cryptocurrency without the friction of digital wallets and exchanges, have experienced their longest streak of outflows since launching—more than $3.7 billion fled in just thirteen trading sessions. Geoffrey Kendrick, who oversees digital asset research at Standard Chartered, called the week "painful" for cryptocurrencies. There was no softer way to describe it. The price had retreated to levels not seen since October 2024, before the U.S. election that brought Donald Trump, whom some had begun calling the first crypto president, to office.

The symbolic blow came from an unexpected direction. Michael Saylor, the co-founder of MicroStrategy and the man who had accumulated roughly 3 percent of all bitcoin in existence, sold thirty-two units. The quantity was trivial—0.0038 percent of his holdings—and the company explained it as a routine measure to fund dividend payments. The conviction remained unchanged, they insisted. But markets read it differently. Saylor was not merely another investor. He had become the movement's most visible evangelist, the man in the orange tie at industry conferences, the true believer who had staked his reputation and his company's capital on the asset. If even he was willing to sell, the market reasoned, then anyone might.

The deeper problem runs to how bitcoin has transformed over the past two years. It was once the domain of ideological purists and anarchists, people who believed in the technology with an almost religious fervor. They held through crashes and skepticism because they held a vision. But institutionalization changed everything. The launch of bitcoin ETFs in 2024 and the regulatory clarity that followed made the asset accessible to traditional financial professionals—portfolio managers, analysts, risk officers. These were not true believers. They were pragmatists who evaluated returns against risk, who compared bitcoin's performance to other opportunities, who would move their capital wherever the numbers pointed.

Carsten Menke, head of next-generation research at Julius Baer, observed that the old ideological investors and the new institutional ones now operated under the same decision-making framework. Javier Molina, an analyst at eToro, put it plainly: the advantage of institutionalization was that bitcoin had become a recognized asset class. The disadvantage was that institutional investors carried no emotional loyalty. When they found better opportunities or detected deteriorating fundamentals, they reduced their exposure without hesitation or guilt.

And they found a better opportunity. Artificial intelligence had captured the market's imagination in a way that bitcoin could not match. Nvidia alone had a market value of $5.1 trillion—more than Germany's entire GDP—while bitcoin's total capitalization stood at $1.2 trillion. Companies building AI infrastructure were delivering tangible results, earnings that could be modeled and justified. Bitcoin, by contrast, depended on liquidity and market confidence. It had no earnings, no products, no quarterly reports showing progress. Christopher Jensen, who leads digital asset research at Franklin Templeton, acknowledged that many investors saw greater profit potential in equities, which were easier to evaluate and defend to clients and boards.

The institutional presence had made bitcoin more sensitive to macroeconomic signals—interest rates, inflation expectations, geopolitical risk. During 2025, its correlation with stocks had risen significantly as investors began treating it like any other risk asset, subject to the same forces that moved the broader market. But those forces were currently working against it. High interest rates persisted, inflation fears lingered, and geopolitical tensions simmered. Yet none of this seemed to touch the AI rally. Stocks tied to artificial intelligence held at record highs, buoyed by expectations of extraordinary future profits. Bitcoin, meanwhile, had no visible catalyst, no narrative that could compete, and an investor base that had lost faith. The question now was whether it would ever get it back.