Concerns over the AI investment boom and uncertainty ahead of the Federal Reserve's next policy decision weighed on risk assets, with systematic funds and algorithmic traders remaining vulnerable to further deterioration in market sentiment, according to a report by Bloomberg.

The world's largest cryptocurrency declined as much as 1.4% to below $79,300 before recovering to around $80,200 in early London trading. Ether, XRP and Solana also weakened as investors reduced exposure to digital assets.

The selloff followed $772.4m in net withdrawals from US-listed spot Bitcoin exchange-traded funds on Thursday and Friday, reversing more than $1bn of inflows earlier in the week.

Pratik Kala, portfolio manager at Apollo Crypto, said Bitcoin remains firmly within the risk-off category for many systematic funds and algorithmic trading strategies, leaving the cryptocurrency exposed to further selling if broader market sentiment deteriorates.

The pullback comes amid mounting concerns over debt-funded AI infrastructure spending, with investors awaiting earnings from major US technology companies for indications of whether investment in the sector can sustain current valuations.

Caroline Mauron, co-founder of Orbit Markets, said Bitcoin had remained relatively resilient despite concerns over AI-related debt weighing on other risk assets, but attention was shifting towards the Federal Reserve's policy meeting and the upcoming US midterm elections.

Kala also highlighted growing concerns over the potential security implications of advances in AI for cryptocurrencies, alongside speculation about consolidation in the technology sector, as additional pressures on investor sentiment.

The latest decline leaves Bitcoin struggling to establish a sustained recovery above $80,000 as macroeconomic uncertainty and weakening appetite for speculative assets continue to shape positioning across digital asset markets.