Will Bitcoin Plummet Again? 'Double Warning' on AI Debt Crisis and $114 Oil Prices

Bitcoin, 'Double Shock' from AI Debt Crisis and Soaring Oil Prices...QCP "Warning Lights for Risk Assets"

▲ Bitcoin (BTC) Crash/ChatGPT Generated Image ©

Bitcoin (BTC) is facing a double whammy of credit instability in the artificial intelligence (AI) industry and surging international oil prices. As the debt burden from AI infrastructure investment spreads to tech stocks and the cryptocurrency market, coupled with rising energy prices from the Middle East, selling pressure on risk assets across the board is increasing. Warnings are emerging that Bitcoin could become even more vulnerable to macroeconomic shocks ahead of the U.S. Federal Open Market Committee (FOMC) meeting.

According to crypto media outlet Cryptopotato on October 24 (local time), digital asset trading firm QCP analyzed in a recent report that the expanding credit risk of AI infrastructure companies is spreading to stock and cryptocurrency markets. The 5-year credit default swap (CDS) premium for AI cloud company CoreWeave was approximately 1,128 basis points (bp), significantly higher than Oracle's 30 bp. This reflects market concerns about the enormous funding costs and debt repayment capabilities required for AI infrastructure expansion.

Indeed, CoreWeave's stock price plunged 10% in a single day on October 10, and the aftermath of the AI credit risk reassessment spread to tech stocks and the cryptocurrency market. Conversely, as safe-haven preference strengthened, buying interest flowed into U.S. long-term Treasury bonds. South Korea's KOSPI index also plummeted over 14% in one week in mid-October, recording its worst 5-trading-day performance since 2008. Amid concerns over AI investment funding and foreign selling pressure on semiconductor stocks, QCP pointed out that Bitcoin has not established itself as an independent safe-haven asset and still exhibits the characteristics of a risk asset, synchronized with the stock market.

The surge in international oil prices from the Middle East is also a burden. Brent Crude prices rose to $114 per barrel on the 23rd, the highest since May 5, due to increasing concerns about supply disruptions following renewed attacks on Saudi Arabian infrastructure by Yemen's Houthi rebels. In the Strait of Hormuz, only 3 tankers with confirmed Automatic Identification System (AIS) signals were observed on October 20. However, including vessels that do not transmit location information, actual crude oil shipments are estimated to be between 3.7 million and 13 million barrels per day. Despite Middle Eastern crude oil exports exceeding pre-war levels, transportation costs, insurance premiums, and geopolitical risks remain high. The freight rate for a 2 million-barrel tanker heading from the Middle East to China was approximately $1.4 million per day, more than 12 times higher than before the war.

QCP warned that AI credit instability and high energy costs could sustain inflationary pressures, making aggressive monetary easing by the Federal Reserve (Fed) difficult. While the market's expectation for an October interest rate hike has virtually dropped to zero, experts believe that interest rate cuts are also unlikely in the near future. Ultimately, Bitcoin's future direction is expected to be largely determined by the AI industry's debt burden, international oil price movements, and the Fed's monetary policy.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*