Institutions Flee Risk Assets as AI Disruption Looms

Futures Open Interest (OI) Drops as Institutions Aggressively Cut Exposure to Risk Assets

Institutional investors have been actively reducing their exposure to risk assets, leading to a significant drop in futures open interest (OI). This trend is a result of concerns about the overall market valuation of artificial intelligence (AI) and the potential disruption caused by DeepSeek's low-cost AI services.

Crypto mining stocks have been particularly hard hit, with companies like Riot Platforms (RIOT), Cleanspark (CLSK), Cipher Mining (CIFR), and MARA Holdings (MARA) experiencing stock crashes of up to 10%. Coinbase's shares also fell by 10%, while MicroStrategy, the largest corporate holder of Bitcoin, saw a decline of 8.5%.

The arrival of DeepSeek has created uncertainty in the market, as its services are offered at much lower prices than competitors. This has raised concerns about the sustainability of AI investments and the future of crypto mining stocks. Bitcoin miners, who were already struggling after Bitcoin's fourth halving in April, have been forced to diversify their operations to include AI and high-performance computing (HPC).

AI crypto tokens have also suffered significant losses, with the total market capitalization for AI crypto tokens dropping 5.11% in the last 24 hours. Venice Token (VVV) and Virtuals Protocol (VIRTUALS) led the losses, falling by 20.29% and 11.75%, respectively.

The ongoing market downturn highlights the increasing challenges faced by both AI and crypto sectors. As institutions aggressively cut their exposure to risk assets, the future of these industries remains uncertain. However, the market is still volatile, and investors should remain cautious and monitor the situation closely.