Ongoing capital rotation for Bitcoin (BTC) and other risky assets is igniting a new leap in the market, backed up with incoming regulatory wins. United States stakeholders expect the Clarity Act to attract long-term investment, which will also impact other jurisdictions.
Can Fund Rotation Save Bitcoin?
This week saw bear traders stall flash sales as crypto assets across the board reversed trajectory. These assets are now set for a sustained recovery on the heels of macro factors and heavy Wall Street capital in the coming months.
First, digital asset commentators tipped the stock market and fund flows out of AI firms to boost most coins. This week, Bitcoin, Ethereum and XRP recorded huge gains alongside key crypto stocks like Coinbase and American Bitcoin.
FRNT Financial CEO Stephane Ouellette said that there’s a chance of a breakout with a decline in AI trades. This downturn is also visible in AI-themed coins influenced by activity in the sector.
“With Bitcoin at the top end of the range, we see the path of least resistance being higher and an elevated likelihood of a breakout of the range as the AI trade slows and the market becomes more comfortable with the path of interest rates…”
 
AI narratives dominated the market last year after a solid buildup since the launch of OpenAI’s ChatGPT in late 2022. The last few months have been marked by geopolitical tensions that affected institutional investors, stalling these stocks.
Many suggest a fund rotation is already in play, leading to whale accumulations and consistent spot Bitcoin ETF inflows. The total AI coin market cap is down to $22.1 billion, with Near Protocol, Bittensor, and Internet Computer posting losses today.
Meanwhile, the Philadelphia Semiconductor Index (SOX), a benchmark for top chip manufacturers, declined sharply, highlighting the shift. Once soaring at a record 110%, tailwinds cooled down, resulting in 20% weekly outflows further fueled by risk in AI infrastructure spending.
At the start of the crypto bear market, several miners purchased heavy-duty computing devices to hedge losses. Large corporations also followed the same path in an attempt to diversify industry-related exposure.
Today, the crypto market moved relatively sideways, but inflows that poured in this week propelled Bitcoin above $65,000 while ETH bulls beat the $1,900 resistance. Traders are now keen on the $2.1k mark for ETH this quarter.
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