AI boom, interest rates and geopolitics: Warning lights flash for risk assets

A rare warning in an optimistic period

While the Fear & Greed index for the crypto market stands at 71 out of 100 — solidly within the greed zone — and Bitcoin trades around 84,062 dollars, analyses are emerging that argue for the opposite of the celebratory mood currently dominating the market.

An article published on Seeking Alpha points to a combination of three macro factors that have historically been associated with sharp corrections in risk assets: explosive growth in capital investments tied to artificial intelligence, rising bond yields, and increased geopolitical tension (seekingalpha.com).

It is worth emphasizing that this is one analyst's assessment, not a consensus. The market is currently trading with clear risk appetite, and the signals described could prove premature — as "bubble" warnings often have been in recent years.

Interest rate levels change the rules of the game

The core of the argument concerns required returns. When U.S. ten-year yields were near zero during the pandemic, it was cheap to hold non-yielding speculative assets such as cryptocurrency and immature tech stocks. With U.S. treasury yields now testing 4.5–5.0 percent, the calculation is entirely different.

Without continuous new capital inflows, prices cannot sustain elevated levels

This means cash equivalents and short-term treasury bonds again compete directly with assets that offer no ongoing return. For institutional investors required to achieve annual returns above a risk-free rate of 4–5 percent, the threshold for holding volatile, non-yielding positions becomes significantly higher than it was in 2020 and 2021.

Historical cycles point toward caution

The analysis highlights Bitcoin's four-year halving cycle and the accompanying downturns that have followed each euphoria peak:

Historically, the bottom in Bitcoin bear markets has occurred 12 to 14 months after the previous peak, according to data from Caleb & Brown and NewHedge's decline database. During these periods, intermediate rallies of 30 to 50 percent have repeatedly emerged, historically catching "buy the dip" investors before deeper structural bottoms were reached.

Although the return multiples from cycle to cycle have diminished as market value has grown into the trillions of dollars, corrections have still consistently fallen 50 to 75 percent from the tops, which according to the analysis skews the risk-reward ratio negatively late in a cycle.

Long-term holders are selling out

On-chain data from analytics firm Glassnode shows that so-called "Long-Term Holders" — investors who have held Bitcoin for extended periods — have historically been the first to distribute their positions into strength, long before retail sentiment turns bearish.

When realized gains from this cohort rise to several billion dollars daily, it is interpreted as a sign that "smart money" is extracting liquidity. When the spot price simultaneously falls below what is called the Short-Term Holder Cost Basis and True Market Mean, the market, according to Glassnode analyses, shifts from an expansive phase to a capital preservation phase, where every rally faces heavy overhang from investors who are underwater and seeking to break even.

Locked tokens: a structural risk of 155 billion dollars

One of the more concrete structural arguments in the analysis concerns the altcoin market. According to figures from Binance Research and Token Unlocks, around 155 billion dollars in tokens are set to be released between 2024 and 2030.

Many venture-capital-funded projects launched with only 10 to 20 percent of the total token supply in circulation, which artificially inflated the initial market value and created enormous "fully diluted valuations" worth several billion dollars. When contractual lock-up periods for early investors expire — typically 12 to 24 months after launch — millions of dollars in selling pressure enter the market, regardless of the product's actual development or retail sentiment.

Hasib Qureshi, managing partner at Dragonfly Capital, has previously described the dynamic such that price formation in low-float tokens occurs in a private market that is "either manipulated, misleading, or both," and that retail ends up as exit liquidity when scheduled releases roll in (via Unchained Crypto).

Assessment: signal or noise?

It is important to add a caveat: the analysis from Seeking Alpha is a single macro assessment, not a collective market view. Bitcoin is still trading well above 80,000 dollars, and the Fear & Greed index of 71 signals that market participants do not currently share the concern.

At the same time, the combination of higher interest rates, large supply overhang from token releases, and historical patterns of cyclical tops are factors that are verifiable and worth monitoring, regardless of short-term price gains. If AI capital investments continue at the current pace, and bond yields remain high, the pressure these factors describe could become more visible in market pricing going forward.

For Norwegian investors with exposure to both tech stocks and cryptocurrency, the point of the analysis is primarily a reminder that higher global interest rate levels increase the opportunity cost of holding non-yielding assets — a dynamic that also affects the pricing of Norwegian growth stocks and funds with tech-heavy portfolios.