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The crypto winter accelerated this week, with Bitcoin and most altcoins remaining in a technical bear market. Bitcoin was trading at $75,800 on Wednesday, down sharply from the all-time high of $126,300. Ethereum price was trading at $2,080, lower than the all-time high of nearly $5,000. This article explores the top reasons behind the ongoing crypto market rally.
Crypto Winter Triggered by the Ongoing AI Boom
One major reason for the ongoing crypto winter is that most investors are focusing on the better-performing artificial intelligence industry.
Top stocks in the industry have done well this year. NVIDIA stock recently hit a record high, and analysts believe that it has more upside to go.
A closer look at the S&P 500 Index shows that the top gainers are all in the artificial intelligence industry. They include companies like Sandisk, Intel, Micron, Lumentum, and Western Digital. All these companies are in the AI industry, with some top names like Micron, SK Hynix, Broadcom, and Samsung hitting a $1 trillion market cap.
More data shows that AI ETFs have continued to attract assets. A good example of this is the recently-launched DRAM ETF, which has become one of the fastest-growing funds in the US. Launched in April, it now has over $11 billion in assets.
In contrast, demand for crypto ETFs has waned, with Bitcoin ETFs experiencing over $1 billion in outflows. Ethereum ETFs have also had substantial outflows this year.
Top stocks in the S&P 500 Index are in the AI industry | Source: TradingView
AI stocks will likely continue doing well in the coming weeks as some of the top companies in the industry go public. This includes companies like Anthropic and SpaceX, which will be valued at over $1 trillion.
Demand for AI assets is also happening in the crypto industry, where tokens like Venice AI, Internet Computer (ICP), and Near Protocol have continued soaring despite the ongoing crypto winter.
SpaceX IPO Has Pushed Investors to Space Stocks
Another reason behind the crypto winter is that investors are piling into space companies. Most space-related companies have all surged this year, with popular names like Rocket Lab, Intuitive Machines, and Planet Labs soaring by triple digits.
A good example of the soaring demand is the recently launched Tema Space Innovators ETF (NASA), which has accumulated over $1.5 billion in assets under management a few months after its launch.
The main reason for the surge is that investors are piling buying these stocks because of the upcoming SpaceX IPO. This will be the biggest public debuts ever as the company will be valued at over $1.5 trillion.
Therefore, with the crypto market struggling, there are chances that investors are rotating to these space stocks as the surge continues.
On top of this, investors are likely dumping cryptocurrencies and moving to the stock market. Indeed, data shows that top stock market ETFs have gained over $100 billion in assets this year.
October 10 Liquidation Event Impacts
The ongoing crypto market winter is also because investors are concerned about the large liquidation event that happened on October 10 last year. Over 1.6 million investors saw their leveraged accounts being wiped out. They suffered over $20 billion in outflows, the highest amount on record.
Ideally, when such a major event happens, many investors just give up and move to other assets like the stock market and bonds.
The rising hacks in the crypto industry have not helped the situation. Data shows that over $1.12 billion has been stolen in hacks in the past 12 months. Some of the most recent hacks were the $11.5 million Verus-Ethereum bridge, $10 million ThorChain, and $18.4 million Rhea Lend. These hacks have pushed more people away from the crypto industry.
