Crypto Falls Below $3T as AI Unwinds and Macro Fears Intensify

The crypto market slid below $3 trillion for the first time since April 2025 as the AI trade unwind intensified, triggering a broad risk-off rotation across asset classes. The selloff, driven by macroeconomic fragility and waning enthusiasm for AI-driven equities, saw digital assets underperform for the third consecutive week, with leveraged long positions unwinding sharply and funding rates turning negative for the first time since late October.

The unraveling of the AI-led rally began after Nvidia's recent earnings, despite beating expectations, failed to sustain momentum. Investors used the bounce to de-risk, signaling a shift in market sentiment as the AI narrative lost incremental buyers. This shift spilled over into crypto, where total market capitalization retreated below $3 trillion amid thin holiday liquidity. Macro headwinds compounded the pressure: U.S. nonfarm payrolls surprised to the upside, December rate-cut odds dipped toward 30%, and Japan's financial stress—evidenced by yen weakness and JGB bear-steepening—raised concerns about its capacity to absorb U.S. Treasuries.

The crypto sector's internal structure, however, showed early signs of stabilization. Perpetual funding rates turned negative and remained so for the longest stretch since October 26, while spot volumes held firm despite a shortened holiday week. Open interest in major perpetual contracts fell from $230 billion in early October to $135 billion, reflecting systemic deleveraging and reduced leverage exposure. Meanwhile, Bitcoin volatility surged, with 7-day realized volatility nearing 50, underscoring the market's fragility.

Sector performance was uniformly weak, with high-beta assets bearing the brunt of the selloff. Layer-2 protocols, gaming, and DePIN tokens fell 14.9%, 12.0%, and 11.4% respectively, while AI-focused tokens dropped 10.5%. Even core layer-1s and the GMCI-30 index, which typically exhibit relative resilience, declined 7.0% and 7.2%. The top 10 tokens, heavily correlated with macro risk sentiment, underperformed the broader market, while smaller-cap assets showed milder drawdowns and early signs of decoupling.

Amid the turmoil, individual stocks tied to AI and SaaS showed mixed signals. C3.ai, a key player in enterprise AI, surged 35% in a week following an expanded partnership with Microsoft, bolstered by strong Q1 FY2025 revenue growth of 21%. Conversely, PetVivo's AI platform, which aims to reduce veterinary client acquisition costs, attracted attention for its potential to scale rapidly, with conservative adoption forecasts projecting $360 million in annual recurring revenue by year five.

The macro reset also impacted traditional markets. Sandisk's inclusion in the S&P 500 on November 28 triggered a 13% post-market rally, with Morgan Stanley raising its price target to $273. Meanwhile, Salesforce's institutional ownership hit 80.43%, with insider transactions and analyst price targets reflecting divergent views on its future trajectory.

Looking ahead, the crypto market faces a critical inflection point. While leverage has diminished and spot activity remains robust, the path to consolidation hinges on macroeconomic stabilization. Wintermute OTC trader Jasper De Maere noted that reduced leverage and negative funding rates create a more orderly recovery environment compared to earlier-year squeezes. For Ethereum, historical patterns suggest support around $2,700–$3,000, with a potential further decline to $2,500–$2,700 if risk assets continue to falter.