Could Bitcoin face an AI sell-off as K33 flags Anthropic IPO?

• Downward pressure on Bitcoin could intensify, with its correlation to AI stocks and the forthcoming FOMC decision posing further risks to the price.
• Concerns that investors may sell Bitcoin to finance their stakes could grow as Anthropic plans to raise $100 billion through its IPO.
• Sharp price swings could follow Bitcoin’s historically low volatility, K33 warns, as leverage accumulates before major market catalysts.

Losses across risk assets could deepen as inflation worries and leverage in technology stocks pose growing risks, according to Wintermute, which says Bitcoin’s (BTC) correlation with the equity market sell-off is strengthening.

Could weakness in AI stocks deepen Bitcoin’s sell-off?

The trading firm’s warning came in its Tuesday market report: a strengthening correlation with artificial intelligence (AI) stocks could leave Bitcoin more exposed to a wider market decline.

With household wealth, leverage and institutional investment flows becoming more closely tied to technology stocks, the firm said equity market conditions now have a crucial influence on Bitcoin’s direction.

Wintermute described the link as follows: "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,"

Shifts in wider market sentiment also leave Bitcoin vulnerable, the market-making firm added, as further gains increasingly rely on retail investment, the equity wealth effect and ETF flows.

How could the FOMC decision and inflation data affect Bitcoin?

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

Wintermute noted that the key question is whether policymakers hint at a potential December rate hike, with Oil prices above $100 heightening inflation risks. The CME FedWatch tool shows markets assigning a 92.8% probability to the Fed keeping rates unchanged.

Bitcoin’s $80,000 support could come under fresh pressure if the statement reinforces expectations of a December hike and drives yields higher. If the December decision remains open, however, prices could recover towards $82,500.

Should a dovish hold be followed by PCE inflation above expectations, Wintermute warned, AI stocks could lead a sell-off that spreads further losses across crypto markets.

Until the FOMC decision is confirmed to have passed without major surprises and Bitcoin has reclaimed $82,500, the firm says its outlook remains cautious.

Could the Anthropic IPO and US midterms add to Bitcoin’s uncertainty?

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

Lunde’s assessment was: “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 expected $100 billion IPO, K33 warned. As a potential precedent, the firm cited the SpaceX IPO, which raised $75 billion. Bitcoin declined from $77,000 to $63,000 over the 23 days between SpaceX’s registration statement and its IPO, while Bitcoin ETPs saw sizeable outflows.

Even so, exceptionally subdued trading activity could precede a sharp rise in volatility, K33 cautioned. Bitcoin’s 30-day price volatility had dropped to the second percentile of readings in the 2020s, while volatility in perpetual futures open interest was 1.3%, among the lowest levels recorded since June 2021.

An extended period of calm lets leverage accumulate gradually, the firm said. A subsequent price move can then force traders to close positions, potentially amplifying market swings.

At the time of writing, BTC trades at $80,670 after gaining 1% over the past 24 hours.