Cryptocurrencies are among the most speculative of assets, prone to the famous vagaries of investors and their animal spirits.
As the prices of artificial intelligence (AI) stocks have swollen over the past two years, so, too, have crypto valuations. That now most household of names, bitcoin, has at times tracked and exceeded the feverish investment in the tech sector.
Worth about $30,000 (€26,000) in September 2023, the currency topped $100,000 in May – and appears to have peaked at $126,000 early last month.
However, as concerns have mounted about wild overvaluations in the tech sector and an AI bubble – as well as concerns about the pace of interest rate cuts – the digital currency has since lost more than 25 per cent of its value.
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Bitcoin and other cryptocurrencies plummeted fast in November, falling much farther and faster than equities and commodities. It has been a rout, forcing crypto-hoarding companies to ditch their holdings in order to prop up their own share prices.
Ian Plunkett was global head of policy communications at Twitter before going on to help found the Blue Owl consultancy group. He says that despite having “anti-establishment credentials”, cryptocoins are now “broadly correlated with the market”.
“This means that as the ‘AI-bubble’ shocks the macro economy, it also shocks the digital asset ecosystem. They are not safe-haven assets. They never were.”
Paul Sommerville of Sommerville Advisory Markets in Dublin agrees.
“Crypto is a ‘risk-on’ asset,” he says. “It does well when investors are feeling euphoric and other parts of the very risky end of the market such as ‘meme stocks’ are doing well. It shows no sign of being a haven of any description thus far, as many fans argue.
“It trades as a leveraged play on general optimism. It is currently doing badly as other highly speculative stocks are getting mauled also.”
Big players have weighed in with warnings about the tech equity surge of recent times. The boss of JP Morgan, Jamie Dimon, has warned that some of the money being poured into AI will “probably be lost”.
He was followed by the boss of Google’s parent company, Sundar Pichai. Speaking to the BBC, the Alphabet chief executive said there were elements of “irrationality” in some AI valuations and no company would be fully insulated should the bubble go pop.
During the current slump, more than $1 trillion has been wiped off the combined $3.2 trillion crypto market. Analysts warn we are at the beginning of a crypto bear market and that a further sell-off, perhaps in the region of 20 per cent, could still materialise.
What people often underestimate about crypto is that it animates a populist impulse, grounded in the abuses and greed of the subprime lending crisis in 2008
— Ian Plunkett, the Blue Owl consultancy group
Initially, 2025 had been billed as a landmark year for cryptocurrencies. US president Donald Trump had branded himself the “crypto president” as he went about cutting red tape and reducing regulation in the sector.
The new chairman at the US Securities and Exchange Commission (SEC), Paul Atkins, who was appointed to the role in April, is a man with a crypto-friendly track record while the Federal Reserve came under sharp pressure from the White House to cut interest rates.
Yet Trump’s hopes of a rapid reduction in rates from the Fed have not come to pass and, given the edginess around AI, crypto has nosedived.
Recent weeks have pointed to the deep unease among investors.
Results from the chipmaker Nvidia, which dominates the Nasdaq index, had been previewed as a bellwether for overall sentiment last week. Markets initially rose on the back of the numbers – which were better than expected – but then plunged again.
As a result, the price of bitcoin and that other household name, ethereum, took a fresh tumble.
Despite the current problems, Plunkett believes crypto has become deeply entrenched within the US financial system and will prevail after the current pricing turbulence.
“The president’s grift has certainly harmed its legitimacy in certain quarters,” he says. “But with spot ETFs [exchange traded funds] on the market, stablecoin legislation passed and broader institutional adoption of blockchain technology, it will continue to grow.
“Crypto evangelists sit right at the centre of American power too and they’re not necessarily fans of the dollar as a global reserve currency.”
One of the biggest cheerleaders for crypto is Trump’s second son Eric. The Trump family is reported to have taken in €800 million in the first half of the year from the sale of crypto assets, with Reuters estimating it had potentially billions more waiting by way of unrealised paper gains.
Eric Trump has been joined by his brother Donald jnr in promoting the family crypto venture, World Liberty Financial, around the world and helping to funnel money towards the Trump organisation.
Other prominent “evangelists” include Cameron and Tyler Winklevoss. The twins, best known as early investors in Facebook, have continued to promote crypto throughout its ups and downs and founded the Gemini crypto exchange.
Tyler recently said the price of bitcoin would one day hit $1 billion. The twins predict the currency could become a “foundation of the economy for the next 500 years” – describing it as “gold 2.0”.
The Winklevosses are close to the Trump administration. They are among 37 people who have contributed to Trump’s $300 million ballroom project, which involved tearing down the east wing of the White House.
Peter Browne, of Baggot Investment Partners, says the collapse in crypto prices is down to two things.
“The shutdown in the US led to a lack of global liquidity and when you get a lack of liquidity, it is risk assets that are always sold,” he says. “Things like bitcoin are among the riskiest. There isn’t the liquidity to sustain them.”
Secondly, he says, there are concerns among crypto purchasers about what advancements in computing might do to the big-name coins. Crypto holds a big attraction for many buyers as they believe their purchases are protected from prying eyes.
It is speculated that machines could soon become powerful enough to break the cryptography around the likes of bitcoin – examine the blockchain data in which they are encased – and expose years of user activity.
“The big worry is quantum computing, will it make these coins hackable?” says Browne. “The Winklevoss brothers have come out in favour of Zcash [a more recently developed cryptocurrency] and are hyping it a lot.
“The speculation is that Zcash is not hackable so those two things combined have put a huge question over the coins that we know like bitcoin and ethereum.”
There seems to be a growing consensus about the unsustainability of the recent market run. Many analysts say it is a matter of when, not if, a correction happens. They say investors have, in many cases, piled in on AI as part of a “momentum trade” rather than looking at the fundamentals behind the companies involved.
Companies heavily invested in AI remain vulnerable to external setbacks. Among those risks are questions around the kind of energy supplies that will be needed to run the massive data centres of the future – and the potential for cheaper, more efficient AI models coming out of China that could make irrelevant the money currently being ploughed into the market.
“I would expect if there were to be a general setback in US speculative stocks, crypto would mirror this move, rather than being any type of haven,” says Sommerville.
“The pullback thus far in crypto is not unusual nor particularly noteworthy but the fun will start if there is a more general move lower in all risk assets. Those believing it to be ‘safe haven’ will be tested more severely.”
Browne agrees that the broad price changes in crypto are likely to track the fortunes of AI stocks. On that front, he believes many tech valuations are over-inflated to the tune of 30 per cent.
“We like the overall markets but we are wary of the AI stocks,” he says.
“When you go back to the year 2000, before the dotcom crash, a lot of stocks were heavily invested in on the basis that the internet was the way forward, which it was. It’s just that the companies invested in weren’t the ones that went on to make the money.
“These companies are totally solid and not going anywhere,” he adds. “But does the share price reflect the amount of money they can generate from AI? That’s the worry.”
It has also been suggested that the sharp drop in bitcoin reflects, in part, the change in political sentiment in the United States over the last few months.
The election of New York mayor, Zohran Mamdani, was a blow to the Maga project that has thrown its weight behind crypto. The self-declared “democratic socialist” ran on an anti-elitist ticket in a city that has big crypto ambitions.
With betting markets pointing to growing expectations that the Democrats will take the House of Representatives next year, the mood music has shifted a little.
And Trump himself has endured a somewhat fraught period due to the Jeffrey Epstein files. His approval ratings remain under water with American voters – at below 40 per cent.
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Plunkett, however, says crypto’s appeal now extends beyond the “tech bros” on the political right and has been embraced by many people on the left of the spectrum.
“There’s an interesting dynamic on the far left, including in Mamdani’s coalition,” he says. “They support the use of crypto as a way to take sovereignty of your assets and not associate yourself with banks and the mainstream institutions of capitalism
“What people often underestimate about crypto is that it animates a populist impulse, grounded in the abuses and greed of the subprime lending crisis in 2008. And that populism exists on the extremes of our political mainstream – both left and right. Trump understood that first. But the left now gets it too.”
At home, the Central Bank of Ireland has become increasingly active in the realm of crypto.
Earlier this month, it levied a €21.5 million fine against Coinbase Europe after finding it had failed to properly monitor 30 million transactions for money laundering or terrorist financing over the period of a year. It was the first punishment of its kind against a crypto platform.
Two years ago, the Central Bank governor Gabriel Makhlouf likened investment in crypto to putting money in a “Ponzi scheme” and said he was concerned about the potential for harm to consumers. More recently he reiterated his remarks about the risks to retail investors but said the development of so-called “stablecoins” might be of benefit to payment systems.
Stripe, owned by the Limerick-born Collison brothers, is one of several companies that have sought to move into stablecoins – a form of crypto that is linked to traditional commodities such as gold.
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It seems that if cryptocoins are to have a future in the mainstream, moving beyond the realm of a risky, speculative asset class, such developments provide the most likely route.
The market developments of the past month have underlined crypto’s inherent volatility. A gold-rush-type surge one minute – a precipitous fall the next. As Sommerville puts it: “It holds none of the qualities or characteristics of gold. Gold is the best performing asset class in 2025 bar none; bitcoin the worst.”
What are cryptocurrencies?
Cryptocurrencies exist within computer networks beyond the reach of central banks or traditional payment systems. They are digital tokens that can be exchanged directly between users online, and their value can swing wildly from day to day depending on demand.
Crypto is underpinned by blockchain technology, a network spread across many different computers that records transactions. Each transaction is grouped together in a “block” and each block is added to a “chain” creating a permanent record.
Advocates say blockchain ensures the credibility of the payments making them transparent and impossible to alter. Multiple computers need to agree that a transaction has taken place before it can be added to the permanent ledger.
Payments are secured through cryptography, meaning users are given a private key to authorise transactions. The fact that the coins can be exchanged directly in a secure way is a key attraction for many users.
An algorithm is used to control the supply of coins, as opposed to a central bank that can increase or decrease money supply as it chooses. The supply of bitcoins, for example, is predetermined and capped.
