Bitcoin and crypto-related stocks got caught in a broader market selloff this week as a sharp plunge in AI stocks reversed the post-election rally. The crypto sector held up relatively better than the AI names that led the downturn, though a $1 billion liquidation wave still swept through digital-asset markets.
For crypto holders, the damage was real but not catastrophic. For anyone long AI equities, it was worse.
The AI unwind hits everything
The post-election rally didn't last. AI stocks were the first to crack, and when they fell, the selloff spread well beyond the AI trade. Crypto-related equities, which had been riding the same risk-on wave, came down with them.
That's the thing about a broad selloff — correlation doesn't care about your thesis. Crypto stocks were never the story here. They were collateral.
Crypto holds up, relatively
Bitcoin and digital assets outperformed the AI names that triggered the slump. That relative strength is the one bright spot in an otherwise ugly stretch for risk assets.
The $1 billion liquidation wave shows leverage got flushed out. That's painful for the traders who got caught, but it also clears positioning. A Wintermute trader framed the situation as a "glass half full" scenario for crypto — a read that leans on the idea that crypto took a lighter hit than the equities that started the mess.
What the desks are watching
The question now is whether the AI unwind is a one-week event or the start of something longer. If AI stocks keep falling, crypto's relative outperformance will get tested hard. Correlation tends to reassert itself when the selling gets serious.
For now, crypto-linked equities remain tied to the same risk appetite that's currently draining out of AI names. The next move in AI stocks is the next move in crypto stocks, whether crypto investors like it or not.
The liquidation wave appears to have run its course for the moment. Whether that holds depends on what happens when markets reopen.
