Bitcoin Edges Back Above $81,000 After AI Stock Rout and $635 Million ETF Outflow Rattle Crypto Investors

Bitcoin edged higher on Friday, steadying above $81,000 after a sell-off the previous day driven by a slump in technology stocks, rising oil prices and a large outflow from U.S. bitcoin exchange-traded funds.

Bitcoin rose $384.41, or 0.47%, to $81,690.50 as of 7:13 a.m. GMT on Friday, recovering slightly after falling more than 3% on Thursday.

Thursday's sell-off

Bitcoin fell about 3.3% to around $81,264 on Thursday and briefly dropped below $81,000, as a broad retreat from risky assets spread across financial markets.

The decline came as technology stocks tumbled on Wall Street. The Nasdaq Composite fell about 2.9% as investors questioned the rising costs of artificial intelligence investment, following Meta Platforms' decision to raise its spending plans. Chipmakers including Nvidia and Lam Research also fell sharply.

Cryptocurrencies often move in step with technology stocks, as both are viewed by many investors as higher-risk assets that tend to fall when markets turn cautious.

Oil prices added to the pressure, with Brent crude surging about 4% amid escalating conflict in the Middle East. Higher energy prices have raised fears of inflation and further interest rate increases, which tend to weigh on speculative assets.

ETF outflows

The sell-off was accompanied by a sharp reversal in flows into U.S. spot bitcoin exchange-traded funds. The funds saw net outflows of about $635.6 million on Thursday, according to data from Farside Investors.

That followed net inflows earlier in the week, including about $524.8 million on Wednesday. Bitcoin ETFs had attracted about $1.07 billion over three sessions before Thursday's reversal.

Spot bitcoin ETFs, which were approved in the United States in early 2024, have become a major channel for institutional and retail investment in the cryptocurrency, and their flows are closely watched as a gauge of investor demand.

Altcoins hit harder

Other cryptocurrencies fell more sharply than bitcoin on Thursday. Ether, the second-largest cryptocurrency, dropped about 3.6% to around $2,381, while Solana fell about 3.3% to around $103. XRP declined about 6.4%.

The selling pushed bitcoin's market dominance, its share of the total cryptocurrency market, to its highest level since May, as investors favored the largest and most established digital asset.

Analysts have identified $2,300 as a key level for ether and $100 for Solana.

A difficult stretch

Bitcoin has struggled in recent weeks to regain momentum, trading well below the record highs it reached last year. The $80,000 level has emerged as an important area of support that traders are watching closely.

Rising interest rates have been a key headwind. The U.S. Federal Reserve raised rates last month for the first time since 2023, and traders see the possibility of another increase in December. Higher rates make holding non-yielding assets such as bitcoin less attractive compared with bonds and savings accounts.

The Fed's policy meeting on Oct. 27-28 will be closely watched for signals about the path of interest rates.

Network updates

Despite the price weakness, developers continued to roll out upgrades across major blockchains. Solana's Alpenglow upgrade went live this week, while Ethereum developers outlined a draft proposal that could significantly shorten the time it takes for transactions to be finalized.

Such developments, however, did little to offset the influence of broader market forces on prices.

What's next

Bitcoin's direction in the near term is likely to depend heavily on conditions in traditional financial markets, particularly technology stocks, oil prices and interest rate expectations.

Traders will watch whether bitcoin can hold above $80,000 and whether ETF inflows resume. Next week's Fed meeting and the upcoming U.S. midterm elections could also bring volatility to crypto markets.