SpaceX IPO Draws Capital Away From Crypto Markets
The highly anticipated $75 billion initial public offering of SpaceX is expected to become the largest IPO on record. However, analysts and cryptocurrency executives say the landmark listing could keep digital asset prices under pressure as retail investors shift funds into high-risk artificial intelligence investments.
The rocket and satellite communications company founded by billionaire Elon Musk merged with AI startup xAI earlier this year. As a result, the combined business is expected to command a valuation of about $1.75 trillion, generating significant attention across financial markets and the media.
Notably, the company has reportedly reserved up to 30% of its shares, worth approximately $22.5 billion, for retail investors. Such a move is unusual for a major IPO, as institutional investors have traditionally dominated large public offerings. Consequently, market participants believe the allocation could encourage individual investors to redirect capital from other speculative assets.
Retail Investors Shift Focus
According to analysts, cryptocurrencies have become one of the primary sources of funding for investors seeking exposure to SpaceX shares. Furthermore, anticipated public offerings from OpenAI and Anthropic later this year could intensify competition for investment capital.
Bitcoin, the world’s largest cryptocurrency, recently traded at $61,852, representing a decline of roughly 52% from its record high of $126,223 in October.
Spencer Hallarn, global head of over-the-counter trading at crypto trading firm GSR, said investors must find substantial capital to participate in the IPO. Therefore, he argued that money is likely to be withdrawn from existing risk assets, including cryptocurrencies.
AI Ambitions Drive Investor Interest
SpaceX transformed commercial space travel into a thriving business. Nevertheless, the company is now pursuing an even larger opportunity through enterprise-focused artificial intelligence.
Its IPO prospectus indicates that the company remains unprofitable overall. Even so, its valuation reflects expectations of sustained rapid growth, supported by ambitions to become a major AI player. In addition, the company continues to pursue long-term projects such as Mars missions and the deployment of AI data centres in space.
Because of these ambitions, crypto executives believe SpaceX appeals to many of the same retail investors who actively trade digital assets. Thomas Puech, chief executive of crypto trading firm INDIGO, said both sectors compete for the same pool of risk capital. He added that AI currently appears to be the more attractive trade for many investors.
Crypto Faces Mounting Challenges
SpaceX’s planned Nasdaq debut arrives during a difficult period for the cryptocurrency market. Last week, bitcoin fell 15%, marking its sharpest weekly decline since November 2022, when crypto exchange FTX collapsed.
Additional pressure emerged after Strategy, the largest corporate holder of bitcoin, disclosed that it had sold part of its holdings for the first time since 2022. Meanwhile, market analysts noted that bitcoin has lost some of its novelty and appeal among investors.
Cryptocurrencies initially rallied after the crypto-friendly administration of U.S. President Donald Trump took office. However, prices weakened sharply after tariff threats directed at China emerged in October. Since then, digital assets have struggled to recover, while U.S. semiconductor stocks have risen substantially.
ETF Outflows Add Pressure
Outflows from cryptocurrency exchange-traded funds have also accelerated. According to CF Benchmarks, more than $2 billion left such products in May alone. Although these ETFs helped boost institutional participation when they launched in 2024, recent withdrawals have highlighted weakening investor sentiment.
Sui Chung, chief executive of CF Benchmarks, said some of the capital leaving crypto markets is likely finding its way into equities. However, he cautioned that it is impossible to determine how much is flowing directly into SpaceX.
Looking ahead, investors are also monitoring expectations that the U.S. Federal Reserve could raise interest rates this year. Higher rates typically favour safer, yield-generating assets. As a result, analysts say cryptocurrencies may struggle to find meaningful support in the near term.
With inputs from Reuters