Elon Musk's SpaceX is scheduled to be listed on Nasdaq on June 12 and is expected to raise more than US$75 billion, making it the largest IPO in global history. However, this capital extravaganza may keep the cryptocurrency market under pressure, as a large number of retail investors attracted by high-risk, high-return investments are scrambling to raise funds to participate in the listing of this star company.
It is said that SpaceX plans to break the long-standing market practice in this IPO and allocate up to 30% of the new shares (about 22.5 billion U.S. dollars) to retail investors, which is a proportion that far exceeds the industry norm.
Analysts and crypto industry executives say the move is driving money away from riskier assets such as cryptocurrencies and into the stock market as crypto investors, including retail investors, raise funds for popular IPOs such as SpaceX, Anthropic, OpenAI and others.
Last week, Bitcoin prices plummeted 15%, the largest weekly decline since the collapse of the FTX exchange in November 2022. At its lowest, the price of Bitcoin fell to $59,100, which was “halved” from the historical high of $126,223 set in October last year.
Spencer Hallarn, global head of OTC trading at cryptocurrency trading firm and liquidity provider GSR, said: "Cryptocurrencies have effectively become a financing vehicle for many investors who need to find funds for this $75 billion IPO, and the funds have to come from somewhere."
Musk has revitalized the space industry through SpaceX and developed space exploration into an industry, but the bigger opportunity the company is currently targeting is the enterprise-level artificial intelligence market.
The SpaceX prospectus shows that the company as a whole is still in a state of loss, and its high valuation is based on expectations of rapid growth in the coming years. These growths not only come from building AI business, but also include forward-looking plans such as Mars missions and space AI data centers.
Crypto industry insiders believe that this kind of AI investment target with both high risk and high growth potential attracts retail investors who are highly overlapping with the cryptocurrency market.
Thomas Puech, CEO of crypto trading company INDIGO, said, “The listing of SpaceX is likely to absorb some funds from the crypto market in the early stages. The two are competing for the same group of risk appetite funds.”
He acknowledged that “AI is clearly a more attractive and hot trading topic at the moment compared to cryptocurrencies.”
At the same time, Strategy, the largest corporate currency holding institution that has been firmly bullish on Bitcoin for many years, disclosed last week that the company sold some of its Bitcoin positions for the first time since 2022, further damaging market confidence.
Trade Nation senior market analyst David Morrison said in a research report: "Cryptocurrencies are indeed not favored by investors at the moment. For many investors, Bitcoin has lost the novelty and appeal of the year, and the IPO boom has undoubtedly exacerbated this situation."
Sui Chung, CEO of crypto index provider CF Benchmarks, said that net outflows from crypto ETFs last month exceeded $2 billion. “Obviously, some of the funds leaving the crypto market are flowing to the stock market, but we cannot be sure whether these funds will flow directly into SpaceX.”
As more popular IPOs line up for listing and the market becomes increasingly concerned that the Federal Reserve may raise interest rates this year, investors may further turn to assets with more stable returns and lower risks.
GSR’s Hallarn said: “It is difficult to see any significant positive factors that can promote a significant rebound in cryptocurrencies at this time.”