The financial world recently got a stark reminder of market sensitivities when Oracle saw a significant drop in its market value. On December 11, the tech giant lost roughly $80 billion after its revenue figures missed expectations, compounded by management announcing a hike in AI-related capital expenditure from $35 billion to about $50 billion, partly funded by increasing debt. The stock plunged up to 16%, triggering a ripple effect that pulled down Nvidia, AMD, and the broader Nasdaq index. Reports quickly pointed to this incident as fanning the flames of “AI bubble” fears, with investors questioning whether the massive investment in data center capacity would yield returns fast enough to justify such costs.
Strikingly, on the very same day, Bitcoin slipped below $90,000. This concurrent movement suggested that concerns over the AI sector were significantly denting broader risk appetite. This single-day event eloquently encapsulates Bitcoin’s evolving structural vulnerability: it appears to have become the high-beta tail of the AI trade, moving in lockstep with tech equity sentiment and experiencing sharper declines when AI-linked stocks face headwinds.
The Unsettling Correlation: Bitcoin and the AI Tech Market
The link between Bitcoin and major tech players is becoming increasingly undeniable. Analysis from 24/7 Wall St. revealed an approximate 0.96 correlation between Bitcoin and Nvidia over a rolling three-month window leading into Nvidia’s November earnings report. This is an exceptionally strong positive correlation, indicating that the two assets largely move in the same direction. Furthermore, data from The Block showed that Bitcoin’s 30-day aggregate Pearson Correlation coefficient with the Nasdaq stood at 0.53 as of December 10. While not as high as with Nvidia, it still signifies a meaningful positive relationship.
Perhaps even more telling is Bitcoin’s performance since the Federal Reserve began easing interest rates on September 17. Bitcoin is down around 20% since then, while the Nasdaq has climbed 6%. This divergence suggests that when tech stocks encounter difficulties, Bitcoin tends to suffer more acutely. The narrative surrounding an “AI bubble” has gained significant traction in recent weeks, backed by growing concerns from various financial observers.
Reuters reported in late November that AI-linked valuations and broader macro gauges, such as the Buffett Indicator, have pushed overall US equity valuations beyond the extremes seen during the dot-com era. Simultaneously, AI-heavy indices have shown sharp pullbacks and rising volatility, even as investor enthusiasm remains elevated.
Adding to these concerns, large tech companies have collectively raised hundreds of billions of dollars in bonds this year to fund the construction of data centers and hardware crucial for AI development. Morgan Stanley estimates a substantial funding gap of around $1.5 trillion for the AI infrastructure build-out. Moody’s chief economist, Mark Zandi, has even warned that AI-related borrowing now exceeds the tech sector’s borrowing levels right before the dot-com crash, signaling a potentially perilous overextension. Essays in publications like The Bulletin of the Atomic Scientists and The Atlantic highlight that roughly $400 billion has been spent on AI this year, against only about $60 billion in revenue. This math implies that many firms are deeply unprofitable, and the broader economy is now, in part, reliant on an AI investment boom that cannot be sustained indefinitely.
The Liquidity Mechanism: Why an AI Bust Could Hit Bitcoin Harder
Should the AI bubble eventually burst, the repercussions for Bitcoin will extend beyond simple market correlation. The expanding AI capital expenditure is increasingly becoming a credit story. Estimates suggest that AI-related data center and infrastructure financing deals are projected to jump from approximately $15 billion in 2024 to roughly $125 billion in 2025. This surge is fueled by bond issuance, private credit, and asset-backed securities. Analysts quoted in a Reuters piece have drawn comparisons between some of these opaque financial structures and patterns observed before the 2008 financial crisis, cautioning about “untested risks” if tenants or cash flows fail to meet expectations.
Central banks are now acknowledging this as a potential financial stability problem. The Bank of England’s recent stability update explicitly highlighted stretched valuations in AI-focused firms. It warned that a sharp correction in AI-linked equities could threaten broader markets through leveraged players and private credit exposures. The European Central Bank’s (ECB) November 2025 Financial Stability Review echoed a similar sentiment: the AI investment boom is increasingly funded through bond markets and private capital, making it highly susceptible to swings in risk sentiment and credit spreads.
Oracle serves as a prime example of this concern. Its $50 billion capital expenditure plan for AI data centers, coupled with a roughly 45% jump in long-term debt and record credit-default-swap spreads, perfectly illustrates the kind of over-extended balance sheet that regulators are closely monitoring. If an AI bubble were to pop, these credit spreads would widen dramatically, refinancing costs would soar, and leveraged funds holding AI-themed debt and equities would be compelled to significantly cut their exposure. Bitcoin, in this scenario, finds itself at the very end of this financial chain.
Chinese researchers, in their analysis of Bitcoin versus global liquidity, have found a strong positive relationship between Bitcoin prices and global M2 or broad liquidity indices. Their paper referred to Bitcoin as a “liquidity barometer” that performs exceptionally well when global liquidity is high and suffers when it contracts.
The liquidity narrative is straightforward: if the AI bubble bursts and triggers a credit squeeze, the immediate effect will be a global de-risking event and a significant pullback in liquidity. Bitcoin is often among the first assets that macro and growth funds sell off when margin calls start coming in. Its pronounced sensitivity to liquidity means that any such drawdown could be amplified, leading to a much steeper decline.
Act Two: How Policy Responses Could Ignite Bitcoin’s Next Bull Cycle
Yet, the story does not end with a potential crash. The other crucial half involves what happens after the initial wave of deleveraging. The very institutions expressing concerns about an AI-driven correction also implicitly hint at the likely policy response. If over-leveraged AI and credit markets become unstable enough to genuinely threaten economic growth, central banks will almost certainly step in to re-ease financial conditions.
The IMF’s latest Global Financial Stability Report cautions that AI-driven equity concentration and stretched risk asset valuations make a “disorderly correction” more probable. It stresses the need for careful, but ultimately supportive, monetary policy to prevent shocks from escalating. History provides a compelling template: following the COVID shock in March 2020, aggressive quantitative easing and unprecedented liquidity provision coincided with a massive surge in the total crypto market cap, which soared from around $150 billion in early 2020 to roughly $3 trillion by late 2021.
A recent Seeking Alpha report mapped Bitcoin’s performance against global liquidity and the dollar index, revealing a consistent pattern: once easing policies genuinely kick in and the dollar weakens, Bitcoin tends to register substantial upside moves over the subsequent quarters. Furthermore, a narrative rotation could play a significant role. If AI equities experience a classic post-bubble hangover, characterized by lower multiples, negative headlines, and political backlash over perceived wasted capital expenditure, a portion of speculative and macro capital might migrate towards a different “future of money” or “anti-system” investment. Bitcoin, as the leading decentralized digital asset, stands out as the cleanest non-corporate candidate for such a rotation.
Recent market stress has already shown capital consolidating back into Bitcoin rather than alternative cryptocurrencies. As liquidity has thinned and volatility increased recently, Bitcoin’s dominance has climbed to approximately 57%, with spot ETFs serving as an increasingly vital institutional on-ramp. Despite its recent correlation with tech stocks, Bitcoin’s core value proposition of decentralization and scarcity remains fundamental to its “hedge” narrative.
The Inescapable Trade-off Bitcoin Faces
Bitcoin’s fundamental challenge is a delicate balancing act. In the short term, it appears unable to fully decouple from the AI trade. An immediate AI credit crunch would likely cause Bitcoin to suffer significantly because it functions as the high-beta tail of macro risk, and global liquidity would contract faster than most assets can adjust. However, in the months that follow, if central banks respond with renewed easing and the dollar weakens, Bitcoin has historically captured outsized gains as liquidity flows back into risk assets and speculative narratives reset.
The critical question for allocators and investors is whether Bitcoin can withstand the initial blow sufficiently to capitalize on the subsequent wave of policy-driven liquidity. The answer hinges on several factors: the severity of the AI correction, the speed with which monetary policy pivots, and whether institutional flows through ETFs and other vehicles can hold steady or break under extreme stress. Oracle’s December 11 earnings miss served as a powerful preview: Bitcoin’s drop below $90,000 on the same day that $80 billion was wiped from Oracle’s market cap clearly demonstrates that the correlation is active and the sensitivity is real. If the AI bubble fully unwinds, Bitcoin is poised to take the initial punch. Whether it emerges stronger from the other side will largely depend on the actions of central banks in the face of a crisis.
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