Bitcoin Faces Further Downside Risk as Oil Surge, AI Fears Dampen Investor Appetite

Bitcoin faces continued downward pressure after a significant sell-off last week, as a combination of geopolitical tensions, concerns over an artificial intelligence stock bubble, and tightening global liquidity dampens investor risk appetite, according to digital asset investment firm Hilbert Group.

Market-Wide Risk Aversion

The cryptocurrency's recent weakness mirrors a broader retreat from risk assets. Renewed geopolitical tensions related to Iran drove Brent crude oil prices to nearly $117 per barrel last week, though they later eased after the U.S. president indicated no immediate plans for military action. This surge in oil prices has stoked inflation fears and soured investor sentiment.

At the same time, a sharp downturn in high-flying technology stocks has added to market jitters. Investors are reassessing the lofty valuations in the AI sector, leading to significant weekly losses for key players. According to Hilbert's Oct. 26 market report:

• Nvidia shares fell 8% last week.
• Meta Platforms stock dropped 9%.
• The tech-heavy Nasdaq Composite declined by approximately 2% for the week, while the S&P 500 shed 1%.

Bitcoin's Technical Outlook

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Bitcoin's price action has exposed its vulnerability to the macroeconomic environment. After hitting a high of $84,800 early last week, the cryptocurrency fell 5.4% over five consecutive losing sessions, briefly dipping below $80,000 to a weekend low of $79,200.

Jesse Marre, a senior portfolio manager at Hilbert, identified $75,500 as a critical support level, warning that a break below it could undermine the bullish market structure built since the summer lows. Currently, Bitcoin is testing a support zone between $78,500 and $79,500. Marre noted that a recovery above $81,400 would restore short-term stability, while a push past $85,000 and $87,500 would strengthen the case for a renewed rally toward the $95,000 to $98,000 range.

Liquidity and Macro Headwinds

Tightening liquidity is adding to the pressure on digital assets. Hilbert's Global Liquidity Index shows deteriorating momentum, compounding market headwinds. While spot Bitcoin ETFs recorded a net inflow of $442 million for the week, this was in spite of a single-day outflow of $635 million on Thursday. The report suggests that these fund flows are following spot market price action rather than leading it.

Investors are now focused on this week's Federal Reserve policy decision on Wednesday. Markets are pricing in an 87% probability that the central bank will hold interest rates steady. Marre anticipates a "hawkish hold," where policymakers keep rates unchanged but leave the door open for a December rate hike amid persistent inflation. Key inflation and growth data, including the PCE index and GDP on Thursday, will be closely watched for further clues on the Fed's path.