The cryptocurrency market showed early signs of stabilisation on Thursday, following a bruising six-week selloff that erased more than $1 trillion from digital-asset valuations and pushed Bitcoin to its lowest level since April.
While traders remain cautious after one of the steepest downturns of the year, pockets of strength emerged across select sectors, led by a sharp rebound in Layer-2 scaling tokens.
The total crypto market, which tracks more than 18,500 assets, had fallen by roughly 25 percent from its October highs, according to data from CoinGecko.
The rout was driven by fading expectations of a U.S. Federal Reserve rate cut next month, a broader retreat from risk assets, and mounting warnings from top technology executives about overheating in the artificial-intelligence sector. Those concerns spilled into global markets, triggering selloffs across equities in Asia, Europe and the U.S.
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Bitcoin, the bellwether cryptocurrency, declined 27 percent over the six-week slump to $91,212, before clawing back above the $92,000 level in early Thursday trading.
Ethereum slipped 1.93 percent hovering near $3,000, as investors rotated away from major Layer-1 chains and toward more nimble scaling solutions.
That rotation was reflected in the standout performance of Layer-2 tokens, which collectively rose 0.52 percent in the past 24 hours. Two high-profile networks: Starknet and zkSync, led the rebound, surging 17.49 percent and 15.23 percent respectively.
The outperformance underscores renewed appetite for tokens tied to scalability, lower transaction fees and next-generation infrastructure, even as broader sentiment remains subdued.
Other niche segments also saw modest gains. AI-linked tokens rebounded alongside tech stocks, with Fetch.ai up 9.45 percent, while NFT-focused tokens such as Zora gained 4.82 percent. A handful of privacy and payments tokens, including Zcash (+12.07 percent), Dash (+5.75 percent), and Hyperliquid (+1.13 percent), also bucked the market’s weakness.
Still, the stabilisation remains fragile. Sector indices showed persistent stress across decentralised finance (DeFi), gaming (GameFi) and social-finance (SocialFi) ecosystems, with ssiDeFi down 3.9 percent, ssiGameFi off 3.17 percent, and ssiSocialFi sliding 3.11 percent.
Analysts warn that liquidity remains thin and macro-driven volatility could continue into December as investors reassess the likelihood of Fed easing and the sustainability of lofty valuations in the AI sector.
The broader pressure on risk assets began intensifying after Sundar Pichai, Alphabet CEO warned of irrationality in AI markets, saying no company, including Google, would be immune if the bubble bursts.
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JPMorgan Chase vice-chair Daniel Pinto echoed the sentiment, cautioning that AI-driven equity valuations are due for a correction, which could spill over into the S&P 500 and adjacent asset classes, including crypto.
Despite the cautious tone, some strategists believe the latest crypto slump may be nearing exhaustion. “After a trillion-dollar unwind, markets typically search for a floor. If volatility continues to cool and rate expectations stabilise, selective sectors, especially Layer-2s, could lead a more sustained recovery,” said another analyst.
For now, the market remains in wait-and-see mode: stabilising, but not yet convincing. Bitcoin’s ability to hold above $92,000, and whether momentum continues in Layer-2 tokens, will determine if Thursday’s gains mark the beginning of a broader turnaround or just a temporary pause in a deeper correction.
