If the AI Boom Goes Bust, What Happens to Crypto? Here's the Most Likely Scenario for the Crypto Market.

If the artificial intelligence (AI) boom leads to a bust in which leading stocks plummet, the implications for the crypto market would be huge and, perhaps surprisingly to some, not necessarily overwhelmingly negative. That's a pressing issue in the moment, as AI chip stocks are looking sickly, with the Philadelphia Semiconductor Index recently posting its longest losing run since 2008, falling for eight straight sessions through the period ended Oct. 16.

Nobody knows whether this is the start of AI stock valuations crashing or just a reset. Either way, it's worth mapping out what each outcome would mean for crypto before the answer arrives.

Bitcoin is the asset to watch

I have three scenarios for how the crypto market would respond to the AI boom collapsing: a base case, a bull case, and a bear case. Bitcoin (BTC +0.43%) will be the weathervane to watch in all three scenarios.

In the base case of an AI bust, most coins, including Bitcoin, would fall alongside the AI stocks because many investors own both. That fall could be quite painful for investors, and there might even be some panic.

Then, some of the capital fleeing AI would start to look for a new home, only to find a stock market packed with rich valuations and few attractive near-term investment opportunities. Bitcoin would thus be one of the likely destinations for that capital, as it's huge, making it suitable for big allocations, and it's also already marked down from its frothiness last year. It's 39% below its all-time high set in early October 2025, and as of Oct. 30, it accounted for about 60% of the crypto sector's total value.

Ethereum (ETH +0.90%) and Solana (SOL -0.67%) would probably recover later than Bitcoin, since both host many AI tokens in their ecosystems whose froth would need to clear first. Crypto AI plays would suffer most, and they might not recover afterward. Bittensor, which pays its token to suppliers of machine-learning work, is already 70% below its all-time high amid the ongoing jitters regarding AI stocks.

In the bull case, Bitcoin and other crypto majors, as well as strong new altcoins like Hyperliquid, would shrug off the bust quickly and keep climbing. This is a possible scenario because many of the crypto majors, like Bitcoin, are not directly exposed to any material issues that could emerge from an AI bust.

In other words, if AI stocks, memory stocks, chipmaker stocks, and data center stocks are all plummeting, that has little to do with the cryptocurrencies that do not aim to compete in AI or to explicitly have anything to do with it. Plus, if there's a crypto bull market in progress, rising coin prices would draw in mobile and speculative capital that was formerly tied to AI stocks even more rapidly.

In the bear case, a broad risk-off rout would severely damage most coins, including Bitcoin, and likely for months.

A Federal Reserve signal of a possible December rate hike would make the entire situation worse. Even with a less hawkish Fed, in this scenario many small AI tokens could go to zero, and even established players like Bittensor might struggle mightily if the bust exposes weak demand for its services. But, even in the bear case, crypto majors wouldn't actually see their investment theses significantly harmed or invalidated by an AI bust.

Coins with good odds of being able to find new sources of growth regardless of AI would eventually recover, though Solana and Ethereum would probably lag, as they're both more exposed to demand for AI. Similarly, emerging segments like privacy coins would eventually recover too.

What are the odds of each crypto scenario?

It's my view that the base case has about 70% odds of playing out if AI companies lose a lot of their value from here. I put the odds of the bull case at 20% and the bear case at 10%.

I plan to buy crypto in all three scenarios, assuming they occur.

But if the bear case occurs, I'll be buying more Bitcoin and Hyperliquid while they're cheap, as they're the most appealing to get at a deep discount, and less Solana and Ethereum, as they're both a bit more exposed to demand for and utilization of AI.