Crypto Market Slows as Investors Flock to Artificial Intelligence

The crypto market is experiencing slower activity due to investor attention and capital shifting towards artificial intelligence (AI). According to Spencer Hallarn, Head of Markets at GSR, AI investment is draining liquidity from the markets. He notes that large technology companies are raising significant amounts of money to fund AI infrastructure, which is tightening liquidity across markets, including crypto.

As a result, clients are turning to longer-term budget planning and treasury management, driving demand for OTC hedging structures. Hallarn also highlights real-world assets as another area of interest, with exchanges expanding beyond crypto into equities, sports gambling, and other asset classes.

Regarding tokenization, Hallarn questions whether current platforms are generating enough activity to justify the attention surrounding the sector. He suggests that tokenization is not just about wrapping an asset in a token but also about fixing traditional banking and settlement rails.

GSR is developing infrastructure connecting traditional finance with crypto, including price feeds, trading capabilities, and market making. Hallarn sees opportunities in shifting hedging activity from crypto spot markets toward underlying equity and futures markets.

He believes that the return of a crypto bull run will depend heavily on macroeconomic conditions, particularly the cooling of AI-related investment and Federal Reserve rate cuts. If these conditions are met, liquidity should come back into the system, potentially supporting another Bitcoin move higher.