Bitcoin Erases Gains as Markets React to Economic Indicators and AI Sector Woes
Bitcoin erased overnight gains Tuesday, falling back below $104,000 during U.S. morning hours after briefly topping $107,000. The largest cryptocurrency dropped to $103,200, unwinding the rally fueled by President Donald Trump's tariff dividend plan and rising optimism that the government shutdown will end soon.
Ethereum fell 1.2% below $3,500 while large-cap altcoins including Solana, XRP, and SUI dropped 3% to 4%, marking a broad retreat across digital assets. The selling extended into crypto-related equities, particularly Bitcoin miners positioned as infrastructure plays in the artificial intelligence boom.
AI Infrastructure Stocks Face Sell-off Following Earnings Reports and Outlook Adjustments
CleanSpark dropped 8%, Hut 8 fell nearly 9%, and Core Scientific tumbled 11.5% in early trading. TeraWulf and Bitdeer posted double-digit declines as the sector faced widespread weakness from firms reporting weaker-than-expected earnings and growth outlooks.
The red-hot AI infrastructure trade appears due for correction after months driven by elevated expectations for computing capacity demand. Cloud computing provider CoreWeave lowered its next quarter outlook citing data center development delays, sending its stock 15% lower to the weakest level since early September.
TeraWulf reported weak earnings while BitDeer posted deeper-than-expected losses and delays in its next-generation ASIC chips. Japanese investment bank SoftBank sold its entire $5.8 billion stake in chipmaking giant Nvidia, driving the AI bellwether's stock 3.5% lower.
Broader Market Trends and Investor Sentiment Influence Crypto Movements
The tech-heavy Nasdaq index fell 0.7% while the S&P 500 lost 0.3%. ADP reported U.S. private employers cut an average 11,250 jobs per week in the four weeks ending Oct. 25, signaling deteriorating labor market conditions.
The CME FedWatch tool prices roughly 67% odds of an interest-rate cut at the Federal Reserve's December meeting, while Polymarket sees slightly higher chances at 72%. Tuesday's decline filled the CME gap formed over the weekend when Bitcoin futures opened higher than the previous session's close.
Bitcoin revisiting these price gaps is common market behavior, though not all gaps necessarily get filled. While overall sentiment has improved in recent days as Bitcoin and Ethereum bounced from lows, traders are using the rebound to take profits across the board, according to Jasper De Maere, OTC desk strategist at Wintermute.
The theme remains profit-taking into strength for altcoins, leading to short-lived outperformance. A consensus is building that major cryptocurrencies need to move higher first before sustained altcoin rallies can develop.