Why the blockbuster SpaceX IPO may spell more bad news for crypto

SpaceX's much-anticipated $75 billion initial public offering, set to be the largest ever, will likely keep cryptocurrency prices in the doldrums as retail investors attracted to new and risky artificial intelligence stocks scramble to get a slice of the action. Celebrity billionaire Elon Musk's rocket and satellite communications company - which merged with his AI startup xAI earlier this year - is expected to fetch a valuation of around $1.75 trillion, sparking a Wall Street and media frenzy. The company has set aside up to 30%, or $22.5 billion, of shares for retail investors, Reuters and other outlets have reported, in a rare move for a blockbuster IPO that historically have been dominated by institutional investors. That has helped drive rotation out of risk assets like cryptocurrencies, as retail and other investors free up cash to buy shares in SpaceX - as well as hotly anticipated IPOs from OpenAI and Anthropic that are expected to follow this year, said analysts and crypto executives. Bitcoin, the world's largest cryptocurrency, was last trading near the $60,000 level, down about 52% from its all-time high of $126,223 in October. "Crypto is a funding currency for a lot of this," said Spencer Hallarn, global head of over-the-counter trading at GSR, a crypto trading firm and liquidity provider. "We've got to find $75 billion for this IPO, and it's got to come from somewhere." With SpaceX, Musk revived space travel, turning cosmic exploration into thriving businesses, but it is eyeing an even bigger opportunity in building AI for enterprises. SpaceX's IPO prospectus shows that the company overall is unprofitable, and its lofty valuation assumes years of rapid growth driven by its plan to become an AI powerhouse, in addition to other futuristic ambitions such as Mars missions and launching AI data centers in space. That makes it the type of risky and speculative AI bet that appeals to the same cohort of retail investors that drive sentiment in crypto markets, crypto executives said. "A SpaceX IPO would likely pull some capital out of crypto, at least initially. Both compete for the same pool of risk capital," said Thomas Puech, CEO of crypto trading firm INDIGO, adding that relative to crypto, AI is "the 'sexier' trade at the moment." THE WORST TIME FOR CRYPTO SpaceX's planned Friday Nasdaq debut could not come at a worse time for cryptocurrencies. Bitcoin tumbled 15% last week, the most since November 2022, when crypto exchange FTX imploded. Adding to the pressure, Michael Saylor's Strategy, the largest corporate holder of bitcoin that has been relentlessly bullish on the token for years, disclosed last week that it had sold some of its holdings for the first time since 2022. "It really is out of favor with investors," said David Morrison, senior market analyst at Trade Nation, in a research note, adding bitcoin has lost its luster and novelty for many investors. "Excitement over the SpaceX IPO isn't helping either." Cryptocurrencies soared after U.S. President Trump's crypto-friendly administration took power, but prices nosedived in October when Trump threatened to impose new tariffs on China, and have struggled to regain their footing since. U.S. semiconductor stocks, meanwhile, have surged 170%. Outflows from crypto exchange-traded funds have also soared, reaching more than $2 billion in May, said Sui Chung, CEO of crypto index provider CF Benchmarks, which provides the index for several of those ETFs. Those products, which were first launched in 2024, had at their outset boosted crypto prices and institutional participation in the market. "Obviously, some of the money that has left crypto is finding its way into the equity market," he said, while cautioning there is no way to be certain that it will flow directly into SpaceX. With other hot IPOs in the pipeline, and growing market expectations that the U.S. Federal Reserve may hike interest rates this year, which could push investors toward safer, yield-generating assets, it is difficult to see crypto soon recovering, said Hallarn. "It's really hard to see some significant tailwinds," he said.