Bitcoin (BTC) slipped below $60,000 for the first time since October last year and then rebounded to around $63,000 on bargain buying. The market is seeing a mix of factors, including fading expectations of U.S. rate cuts, fund flows driven by the artificial intelligence (AI) investment boom, and shifts in institutional investor sentiment.

On June 8, Decrypt said bitcoin fell as low as $59,227 intraday on June 6 before staging a rebound. Bitcoin is now trading around $63,000, up 1.4 percent from the previous day.

The drop rattled the broader crypto market, not just bitcoin. Ether (ETH) at one point slipped to $1,500 and Solana (SOL) was at $63.75. Many major altcoins posted double-digit declines, and total market liquidations were tallied at more than $1.6 billion.

The first variable market participants focused on was U.S. employment data. U.S. nonfarm payrolls rose by 172,000 in May, well above the market forecast of 85,000. With April employment figures also revised higher, expectations for rate cuts this year retreated. CME FedWatch showed the probability that rates remain at a higher level through year-end rose to 42.7 percent. The market is watching this week's consumer price index (CPI) release and the June 16-17 Federal Open Market Committee (FOMC) meeting.

The recent race to invest in AI is also being cited as a burden on the crypto market. Google raised $84 billion this week, and Meta is also pursuing additional fundraising worth tens of billions of dollars to finance AI investment. SpaceX, meanwhile, set an offering price of $135 per share ahead of a Nasdaq listing on June 12. The total fundraising was put at about $75 billion, with the company's valuation presented at about $1.75 trillion. In the crypto market, a perception has spread that such large-scale fundraising is pulling money out of risk assets. Michael Saylor, Marty Greenspan and Jameson Lopp publicly saw the AI investment cycle as absorbing funds that had previously flowed into crypto.

Shaken confidence in institutional demand also weighed on sentiment. Decrypt reported that Strategy sold bitcoin for the first time in four years, delivering a significant blow to market psychology. The shift in strategy by a company known for consistently accumulating bitcoin was seen as heightening investor anxiety.

Fund flows also backed the bearish tone. Spot bitcoin ETFs saw net outflows of $325 million in a single day, and weekly net outflows totaled $1.72 billion. Spot ether ETFs also saw weekly outflows of $174 million. Still, the market showed signs of stabilising as bargain buying emerged after the sharp drop. More than $500 million in crypto short positions were liquidated over the weekend, sharply increasing losses for investors betting on further declines.

Among individual tokens, Zcash (ZEC) rebounded strongly. The Zcash development team proposed the 'Ironwood' network upgrade in response to a four-year counterfeiting vulnerability revealed in the 'Orchard' privacy pool, and ZEC rose 45 percent afterwards.

On the regulatory side, the U.S. Congress has begun discussions in earnest on overhauling crypto taxation. The House Ways and Means Committee released seven draft bills on crypto taxes ahead of a hearing this week. Key items include tax-free treatment for small transactions, adjusting the timing of taxation for mining and staking rewards, treating stablecoin transactions as cash equivalents, applying wash-sale rules to crypto, allowing professional traders to elect mark-to-market accounting, an IRS safe harbour for previously unreported cases, and easing appraisal burdens for donations.

The market is expected to watch interest-rate variables, major fundraising schedules and ETF flows for now. The outlet said the AI funding absorption could continue for at least several more weeks, and that direction could become clearer after this week's CPI release and the FOMC meeting. At the same time, as gold fell below its 200-day moving average for the first time since October 2023, a possible shift of funds into bitcoin was also raised. Still, there are views that it will take more time to see whether the market can restore confidence shaken by Strategy's sale.