AI Investments Drain Crypto Liquidity, Experts Say
Bitcoin's sluggish momentum has left crypto traders puzzled, but GSR's Head of Markets, Spencer Hallarn, claims the slowdown is due to capital shifting towards artificial intelligence infrastructure. This influx of funds into AI investments is pulling liquidity away from crypto markets, making it difficult for investors to make fresh gains.
The issue lies not within the crypto ecosystem itself, but rather with how capital is being allocated. Big tech companies are issuing massive amounts of equity to fund their AI buildouts, which in turn tightens market liquidity across all asset classes.
Clients are responding by adopting a more defensive approach, focusing on long-term budget planning, over-the-counter hedging, and real-world assets. Tokenization platforms with heavy KYC requirements are also struggling to generate meaningful transaction volumes, as the friction built into onboarding and compliance is limiting activity.