Bitcoin’s value has nosedived further, dropping 13% to $US63,170, marking a significant decline since its peak last October. The cryptocurrency’s tumultuous performance is mirrored in the Australian Securities Exchange (ASX), which is set to open lower today. The sharp fall in Bitcoin’s value has nearly halved since its high last year, raising concerns among investors and analysts alike.
Senior Financial Market Analyst Kyle Rodda attributes the cryptocurrency’s volatility to several factors. He notes the complexity of these movements, highlighting potential spillover effects from the recent sell-off in precious metals like gold and silver.
Understanding the Market Dynamics
Rodda explains, “Gold and silver, especially silver, had attracted a lot of speculators who bought the metals with significant leverage. The collapse in precious metals has probably forced some investors to sell other assets to cover losses, including crypto.” This insight suggests a broader market reaction, where losses in one sector prompt asset liquidation in others.
Moreover, Bitcoin’s value appears to be intertwined with the performance of US tech stocks. Rodda points out, “We are seeing a rotation out of them because they are expensive. There’s also persistent concerns about overinvestment in the industry.” This correlation indicates that as tech stocks face scrutiny, Bitcoin may also experience pressure.
Long-Term Trends and Market Sentiment
Bitcoin’s bearish trend has been evident since October, with sentiment remaining shaky. Rodda observes, “The psychology here is a trader who bought at, say, $US100k may have had enough and has hit the sell button.” This sentiment underscores the challenges faced by investors who entered the market during its peak.
“Because it’s such a speculative asset, it’s had a tendency to lead moves in stocks when market sentiment is getting bearish. This could be the canary in the coal mine,” Rodda adds.
Big Tech’s Investment Surge
Meanwhile, Amazon has announced plans to significantly increase its capital expenditures, projecting $US200 billion in 2026. This move aligns with the broader trend among tech giants to ramp up investments in artificial intelligence (AI) infrastructure. Amazon’s announcement follows similar commitments from Microsoft, Google, and Meta, collectively expected to spend over $US500 billion this year.
Despite the enthusiasm for AI, Wall Street has signaled that such spending must yield tangible returns. Google’s robust cloud revenue growth allowed it to justify its substantial capex forecast, while Microsoft’s modest cloud unit growth led to investor disappointment.
Amazon’s Strategic Moves
Amazon, the largest cloud services provider globally, has faced capacity constraints amid strong enterprise demand for AI infrastructure. The company has responded by launching its AI infrastructure project “Rainier,” deploying nearly half a million Trainium2 chips. Although AWS contributes a smaller portion of Amazon’s overall sales, it generates a significant share of operating profit.
In addition to its cloud services, Amazon is expanding its e-commerce business, targeting rural areas in the United States and enhancing delivery capabilities. The company’s retail division is also undergoing changes, with plans to expand its Whole Foods footprint and open a mega-store to compete with major retailers like Walmart and Costco.
Rio Tinto and Glencore Merger Talks Collapse
In other news, Rio Tinto has ended merger discussions with Glencore, a move that would have created the world’s largest mining company. The proposed merger, initially announced in January, failed to deliver sufficient value to shareholders, according to Rio Tinto. This marks the second failed merger attempt in just over a year.
Glencore’s shares fell 7% following the announcement, while Rio Tinto’s shares also saw a decline. Glencore expressed dissatisfaction with the proposed terms, stating that they undervalued its contributions, particularly in the copper sector.
“There are various ways for Glencore to unlock value, but getting acquired at a premium in an all-share deal to form a combined company would have been the simplest and most elegant path to a significantly higher share price,” commented Jefferies analyst Christopher LaFemina.
Global copper demand is expected to rise significantly by 2040, driven by the energy transition and AI demand, highlighting the strategic importance of the sector.
RBA Governor’s Upcoming Appearance
Looking ahead, Reserve Bank of Australia (RBA) Governor Michele Bullock is set to appear before the House of Representatives Standing Committee on Economics in Canberra. This follows the RBA’s recent decision to raise interest rates by 0.25 percentage points to 3.85%. Economists anticipate further rate hikes this year as the RBA navigates economic challenges.
Stay tuned for live updates from my colleague Gareth Hutchens, who will cover the proceedings throughout the morning.
