The total value of the crypto market dipped below $3 trillion for the first time since April 2025, as the reversal of AI-driven trades accelerated and prompted a widespread shift away from riskier assets. This decline, fueled by ongoing macroeconomic uncertainty and fading interest in AI-related stocks, marked the third straight week of underperformance for digital currencies, with a rapid unwinding of leveraged long bets and
funding rates dropping into negative territory
for the first time since late October.
The AI-fueled rally began to unravel after Nvidia’s latest earnings report, which, despite surpassing forecasts, failed to maintain upward momentum. Investors took the opportunity to reduce risk, indicating a change in sentiment as
enthusiasm for the AI theme waned
. This change extended to the crypto space, where total market cap fell below $3 trillion amid thin trading during the holidays. Additional macroeconomic challenges added to the strain:
U.S. nonfarm payrolls came in stronger than expected
, the probability of a December rate cut slipped to around 30%, and
financial instability in Japan
—highlighted by a weaker yen and a steepening JGB yield curve—sparked worries about Japan’s ability to absorb U.S. Treasury debt.
Despite these pressures, some stabilization was evident within the crypto sector. Perpetual funding rates stayed negative for the longest period since October 26, while spot trading volumes remained steady even with the holiday-shortened week.
Open interest in leading perpetual contracts dropped
from $230 billion in early October to $135 billion, indicating broad deleveraging and a reduction in leveraged positions. At the same time,
Bitcoin
volatility spiked, with 7-day realized volatility approaching 50, highlighting the market’s vulnerability.
Performance across the sector was weak, with the most volatile assets suffering the largest losses. Layer-2 solutions, gaming tokens, and DePIN coins fell by 14.9%, 12.0%, and 11.4% respectively, while
AI-related tokens declined 10.5%
. Even major layer-1s and the GMCI-30 index, which are usually more stable, dropped 7.0% and 7.2%.
The top 10 tokens
, which are closely tied to broader macro sentiment, lagged behind the overall market, while smaller-cap coins experienced less severe declines and showed early signs of moving independently.
During this period, individual AI and SaaS stocks delivered mixed results.
C3.ai, a prominent enterprise AI company
, jumped 35% in a week after expanding its partnership with Microsoft and reporting a 21% increase in Q1 FY2025 revenue. In contrast,
PetVivo's AI solution
, designed to lower veterinary client acquisition costs, drew attention for its rapid growth potential, with conservative estimates projecting $360 million in annual recurring revenue by its fifth year.
Traditional markets also felt the effects of the macro reset.
Sandisk’s addition to the S&P 500
on November 28 sparked a 13% surge in after-hours trading, with Morgan Stanley raising its price target to $273. Meanwhile,
Salesforce’s institutional ownership reached 80.43%
, and insider activity along with analyst targets reflected differing opinions on its future direction.
Looking forward, the crypto market stands at a pivotal juncture. Although leverage has been reduced and spot trading remains strong, the market’s ability to stabilize will depend on broader macroeconomic conditions. Wintermute OTC trader Jasper De Maere observed that lower leverage and negative funding rates provide a more stable environment for recovery compared to previous short squeezes earlier in the year. For
Ethereum
,
historical trends indicate support
in the $2,700–$3,000 range, with the possibility of a further drop to $2,500–$2,700 if risk assets continue to weaken.
